Magnetic sorting using magnetic beads has become a routine methodology for the separation of key cell populations from biological suspensions. Due to the inherent ability of magnets to provide forces at a distance, magnetic cell manipulation is now a standardized process step in numerous processes in tissue engineering, medicine, and in fundamental biological research. Herein we review the current status of magnetic particles to enable isolation and separation of cells, with a strong focus on the fundamental governing physical phenomena, properties and syntheses of magnetic particles and on current applications of magnet-based cell separation in laboratory and clinical settings. We highlight the contribution of cell separation to biomedical research and medicine and detail modern cell-separation methods (both magnetic and non-magnetic). In addition to a review of the current state-of-the-art in magnet-based cell sorting, we discuss current challenges and available opportunities for further research, development and commercialization of magnetic particle-based cell-separation systems.