Multifunctional nanoparticle systems (MFNPSs) have seen a recent increase in the research effort put into the development of newer and improved systems around the world. This review covers the physical and biological aspects involved in nanoparticle systems having multiple functions such as optical and magnetic resonance imaging capabilities with incorporated bioactive molecules. Recent examples are covered based on a simple but logical categorization scheme. The promising platform of MFNPS in biomedical research is, in addition, discussed under the context of health (safety) and ethical concerns.