Magnetic nano particles are of great interest for researchers from a wide range of disciplines, including magnetic fluids in biotechnology/biomedicine, magnetic resonance imaging and environmental remediation. While a number of suitable methods have been developed for the synthesis of magnetic nano particles of various different compositions, successful application of such magnetic nano particles in the areas listed above is highly dependent on the stability of the particles under a range of different conditions. In the present review, first we have briefly discussed main synthetic methods of MNPs, followed by their characterizations and composition. Then we have discussed the potential applications of MNPs in different with representative examples. At the end, we gave an overview on the current challenges and future prospects of MNPs. We focus mainly on recent developments in the synthesis of magnetic nanoparticles, and various strategies for the protection of the particles against oxidation and acid erosion. Further functionalization and application of such magnetic nanoparticles in catalysis and bio separation will be discussed in brief. This comprehensive review not only provides the mechanistic insight into the synthesis, functionalization, and application of MNPs but also outlines the limits and potential prospects. Key Words: Magnetic nanoparticles, iron oxide ,magnetite , Hyperthermia