<p>Iron oxide nanoparticles (IONs) due to its properties have taken over the applications to remove industrial waste, can treat wastewater, and catalyze reactions. The emerging green nanotechnology has emerged as a sustainable and eco-friendly approach for synthesizing IONs. The most effective iron oxide nanoparticles with excellent magnetic, photocatalytic, and adsorption properties, as compared to conventional physical and chemical methods. This review covers the eco-friendly synthesis of IONs utilizing biomaterials such as bacteria, fungi, plants, and algae. The study broadly investigates magnetic behavior, surface functionalization, and contact areas of IONs with diverse biocompatible coatings like silica, PEG, PVA, organosilane, and chitosan etc. Furthermore, the impact of size, shape, and morphology with intrinsic features on the magnetic properties of the nanoparticles is thoroughly discussed. Additionally, it highlights the practical advantages of these biosynthesized IONs, emphasizing their easy separation and reusability for heavy metal removal, and concludes by summarizing key findings and outlining promising future research directions in this field. The literature studies have shown excellent adsorption capacities of IONs for heavy metals under optimal pH, along with good magnetic separability and reusability, providing an efficient and sustainable approach for both rare earth and heavy metal removal from aqueous systems. This review focuses on the green synthesis, functionalization, and reusability of low-cost coated IONs for efficient toxic element removal. It also stresses the need to enhance their durability, eco-compatibility, and real-world application.</p> Graphical abstract <p></p>