Nanoparticles have emerged as versatile tools in the realm of thermal therapy, offering precise control and feedback mechanisms for targeted treatments. This review explores the intersection of nanotechnology and thermal therapy, focusing on the utilization of nanoparticles for image-guided interventions and temperature monitoring. Starting with an exploration of local temperature dynamics compared to whole-body responses, we delve into the landscape of nanomaterials and their pivotal role in nanomedicine. Various physical stimuli employed in therapy and imaging are scrutinized, laying the foundation for nanothermal therapies and the accompanying challenges. A comprehensive analysis of nanomaterial architecture ensues, delineating the functionalities of magnetic, plasmonic, and luminescent nanomaterials within the context of thermal therapies. Nano-design intricacies, including core-shell structures and monodisperse properties, are dissected for their impact on therapeutic efficacy. Furthermore, considerations in designing in vivo nanomaterials, such as hydrodynamic radii and core sizes at sub-tissue levels, are elucidated. The review then delves into specific modalities of thermally induced therapy, including magnetically induced hyperthermia and luminescent-based thermal treatments. Magnetic hyperthermia treatment is explored alongside its imaging and relaxometric properties, emphasizing the implications of imaging formulations on biotransformation and biodistribution. This review also provides an overview of the magnetic hyperthermia treatment using magnetic nanoparticles to induce localized heat in tissues. Similarly, optical and thermal imaging techniques utilizing luminescent nanomaterials are discussed, highlighting their potential for light-induced thermal therapy and cellular-level temperature monitoring. Finally, the application landscape of diagnosis and photothermal therapy (PTT) is surveyed, encompassing diverse areas such as cancer treatment, drug delivery, antibacterial therapy, and immunotherapy. The utility of nanothermometers in elucidating thermal relaxation dynamics as a diagnostic tool is underscored, alongside discussions on PTT hyperthermia protocols. Moreover, the advancements in nanoparticle magnetic imaging and implications of imaging formulations especially in creating positive MRI contrast agents are also presented. This comprehensive review offers insights into the evolving landscape of nanoparticle-based image-guided thermal therapies, promising advancements in precision medicine and targeted interventions, underscoring the importance of continued research in optimization for the full potential of magnetic hyperthermia to improve its efficacy and clinical translation.