Rapid and accurate measurements of protein biomarkers, pathogens and cells in biological samples could provide useful information for early disease diagnosis, treatment monitoring, and design of personalized medicine. In general, biological samples have only negligible magnetic susceptibility. Thus, using magnetic nanoparticles for biosensing not only enhances sensitivity but also effectively reduces sample preparation needs. This review focuses on the use of magnetic nanoparticles for in vitro detection of biomolecules and cells based on magnetic resonance effects. This detection platform, termed diagnostic magnetic resonance (DMR), exploits magnetic nanoparticles as proximity sensors, which modulate the spin-spin relaxation time of water molecules surrounding molecularly-targeted nanoparticles. By developing more effective magnetic nanoparticle biosensors, DMR detection limits for various target moieties have been considerably improved over the last few years. Already, a library of magnetic nanoparticles has been developed, in which a wide range of targets, including DNA/mRNA, proteins, small molecules/drugs, bacteria, and tumor cells, have been quantified. More recently, the capabilities of DMR technology have been further advanced with new developments such as miniaturized nuclear magnetic resonance detectors, better magnetic nanoparticles and novel conjugational methods. These developments have enabled parallel and sensitive measurements to be made from small volume samples. Thus, the DMR technology is a highly attractive platform for portable, low-cost, and efficient biomolecular detection within a biomedical setting.