A new generation of magnetic lateral flow immunoassays is emerging as powerful tool for diagnostics. They rely on the use of magnetic nanoparticles (MNP) as detecting label, replacing conventional gold or latex beads. MNPs can be sensed and quantified by means of external devices, allowing the development of immunochromatographic tests with a quantitative capability. Moreover, they have an added advantage because they can be used for immunomagnetic separation (IMS), with improvements in selectivity and sensitivity. In this paper, we have reviewed the current knowledge on magnetic-lateral flow immunoassay (LFIA), coupled with both research and commercially available instruments. The work in the literature has been classified in two categories: optical and magnetic sensing. We have analysed the type of magnetic nanoparticles used in each case, their size, coating, crystal structure and the functional groups for their conjugation with biomolecules. We have also taken into account the analytical characteristics and the type of transduction. Magnetic LFIA have been used for the determination of biomarkers, pathogens, toxins, allergens and drugs. Nanocomposites have been developed as alternative to MNP with the purpose of sensitivity enhancement. Moreover, IMS in combination with other detection principles could also improve sensitivity and limit of detection. The critical analysis in this review could have an impact for the future development of magnetic LFIA in fields requiring both rapid separation and quantification.