Magnetic nanoparticles (MNPs) have been studied widely as a powerful diagnostic probe and therapeutic agent for biomedical applications. In recent years, they are also found to be sensitive to magnetoresistive (MR) devices and MNP-MR biochips are predicted to be more affordable, portable and sensitive than the conventional optical detection methods. In this MNP-MR biochip design, MNP probes are required to have high magnetic moment, high susceptibility, and be target-specific. This review summarizes recent advances in chemical syntheses and functionalization of MNPs with controlled magnetic properties for sensitive MR detection and for bio-sensing applications.