Metal nanoclusters (NCs) are emerging as a new class of functional nanomaterials in the area of biological sensing, labelling, imaging and therapy due to their unique physical and chemical properties, such as ultrasmall size, HOMO-LUMO transition, strong luminescence together with good photostability and biocompatibility. A recent surge of interest in this field is the surface functionalization of these metal NCs through which one can tailor their physicochemical properties, such as stability in solution, and strong luminescence, as well as their biodistribution and toxicity in biological systems, which in turn can empower these functionalized NCs with desirable targeting, imaging, and therapeutic ability for biomedical applications. In this review, we first introduce the functionalization strategies for the metal NCs developed in the past few years, followed by highlighting some biomedical applications of these functionalized metal NCs. We then discuss the difference of in vitro and in vivo fate as well as toxicity between various functionalized metal NCs. Finally, we present a short discussion on the current challenges and provide an outlook of the future developments of these functional metal NCs.