Iron (Fe)-based nanoparticles (NPs) represented by Fe3O4 exhibit attractive properties, such as high saturation magnetization, low magneto-crystalline anisotropy, and good biocompatibility, and are useful as magnetic resonance imaging (MRI) contrast agents. However, the existence of artifacts makes the single magnetic resonance imaging mode lack accuracy in tumor diagnosis. To overcome this limitation, a strategy where rare-earth elements are combined with Fe-based NPs is applied. Rare earth is the general name of Sc, Y, and elements with unique 4f electronic configurations. Some rare-earth elements like Gd and Lu exhibit magnetic properties due to unpaired electrons, while some, like Er and Ho, fluoresce under excitation ascribed to the electron transition at intermediate energy levels. In this manuscript, attention is focused on multimodal nanomaterials composed of rare-earth elements and Fe-based NPs. We provide an overview of the synthetic routes and current biomedical application of the nanocomposites that show potential for precise diagnosis and efficient treatment of cancers.