Over the past decade, the synthesis of superparamagnetic nanoparticles, especially iron-oxide nanoparticles (IONPs), has been researched intensively for many high-technology applications, including enhanced storage media, biosensing and medical applications. In medicine, IONPs are used as contrast agents in magnetic resonance imaging and in hyperthermia therapy, and can also be exploited in drug or gene delivery as they are relatively non-toxic. However, their usage in vivo is limited by their agglomeration in biological fluids, induced by their high surface energies and tendency to adsorb proteins. The addition of a polymer layer to the surface of IONPs can stabilize these nanoparticles, giving well-dispersed individual nanoparticles in biological fluids for in vitro and in vivo applications, thereby increasing the blood circulation half-life. Moreover, the polymer layer can endow the IONPs with functionality, providing a scaffold for the encapsulation or attachment of therapeutic agents (drugs or genes), targeting agents and permeation enhancers. This review examines recent advancements in the use of IONPs in medicine, a field that has been particularly active in the last few years.