This paper reviews the effect of organic and inorganic coatings on magnetic nanoparticles. The ferromagnetic-like behaviour observed in nanoparticles constituted by materials which are non-magnetic in bulk is analysed for two cases: (a) Pd and Pt nanoparticles, formed by substances close to the onset of ferromagnetism, and (b) Au and ZnO nanoparticles, which were found to be surprisingly magnetic at the nanoscale when coated by organic surfactants. An overview of theories accounting for this unexpected magnetism, induced by the nanosize influence, is presented. In addition, the effect of coating magnetic nanoparticles with biocompatible metals, oxides or organic molecules is also reviewed, focusing on their applications.