The design and development of a multifunctional and stimuli-responsive magnetic nanoparticle (MNP)-based drug delivery system has attracted great interest for the diagnosis and therapy of cancer. However, the effective incorporation of magnetic iron oxide nanoparticles into biomedical systems requires in vitro and in vivo stability, good biocompatibility, high loading efficacy, and controlled drug release. Surface-functionalized magnetic iron oxide nanoparticles created using engineered surface ligands have presented new strategies for the applications of MNP-based drug delivery systems in cancer imaging and therapy to overcome these obstacles. Moreover, the development and design of stimuli-responsive ligands has been combined with the engineering of multiple physicochemical features into MNPs to enhance the performance of the MNP-based delivery system. This review briefly overviews the latest developments in the design of multifunctional and stimuli-responsive MNP-based drug delivery systems and summarizes their applications in the diagnostic imaging and treatment of cancer.