Abstract: Oily wastewater, a byproduct of various industrial processes, such as petroleum refining, metal processing, and food production, poses significant threats to industrial production, economic development, and environmental sustainability. Its improper disposal can lead to equipment corrosion, pipeline blockages, and even fires, causing substantial economic losses. Moreover, the release of oily wastewater into the environment contaminates water bodies, harms aquatic ecosystems, and adversely impacts human health through the food chain. Therefore, developing efficient and environment-friendly technologies for oily wastewater treatment is crucial. Among various treatment methods, the use of magnetic particles has emerged as a promising approach owing to its unique advantages. Magnetic particles exhibit excellent oil–water separation performance, enabling the efficient removal of oil droplets from wastewater. Their simple preparation process, often involving co-precipitation or sol–gel methods, facilitates cost-effective large-scale production. Furthermore, magnetic particles are environment-friendly as they can be easily recovered and reused through magnetic separation, minimizing secondary pollution. These advantages make magnetic particles highly attractive for practical applications in oily wastewater treatment. This paper presents a comprehensive review of the application of magnetic particles in this context. First, the sources and characteristics of oily wastewater are discussed, highlighting the complexity and challenges associated with its treatment. Subsequently, the principles and processes of oil–water separation using magnetic particles are introduced, emphasizing the role of surface properties, magnetic responsiveness, and particle size in determining separation efficiency. The different structures of magnetic particles employed for oil–water separation, including core-shell structures, Janus particles, and magnetic composites, are then summarized. Each structure offers unique advantages in terms of oil adsorption capacity, selectivity, and recyclability. Practical applications of magnetic particles in various industries, such as oil spill cleanup, produced water treatment, and emulsion separation, are also explored, demonstrating their versatility and effectiveness. Furthermore, the paper presents the regeneration strategies for magnetic particles, which are crucial for their sustainable application. Thermal regeneration, solvent washing, and magnetic field-assisted regeneration are among the methods explored; their advantages and limitations are analyzed. The factors influencing the oil–water separation performance of magnetic particles, such as surface wettability, magnetic field strength, and operating conditions, are also examined. Synergistic methods—combining magnetic separation with other techniques, such as flocculation, filtration, and advanced oxidation—to enhance the performance of magnetic particles are reviewed. Additionally, an overview of the equipment used for magnetic separation is presented. Two prevalent operational principles are discussed: one involves fixing magnetic particles in place and allowing oily wastewater to flow through them; the other entails adding magnetic particles to the wastewater, mixing them thoroughly to adsorb dispersed oil, and subsequently separating the magnetic particle–oil mixture from the water by using magnetic selection. These two approaches are analyzed in terms of their efficiency, scalability, and suitability for different types of oily wastewater. Finally, a forward-looking perspective on the future developments in this field is presented. Key research directions, such as the development of novel magnetic materials with enhanced performance, the integration of magnetic separation with other technologies for improved efficiency, and the exploration of new applications in emerging fields, are identified. This paper serves as a valuable reference for researchers and engineers involved in the design, synthesis, and application of magnetic particles for oil–water separation, contributing to the advancement of sustainable oily wastewater treatment technologies.