Over the past several decades, the disposal of dyes from the industrial manufacturing sector has had an inadvertent impact on water ecology as polluted water bodies with hazardous dyes directly or indirectly perturb the entire biosphere thus making it a subject of topical interest. In this regard, chitosan-based decorated magnetic nanocomposites (CDMNs) have been used as efficient, cost-effective, and biodegradable nano-adsorbents, for the removal of environmental contaminants. With exceedingly advanced properties such as a high specific surface area, apparent active sites, facile isolation, recyclability, and convenient functioning, these nanomaterials also overcome the post-processing difficulties of adsorption due to their magnetic responsiveness. Furthermore, the use of the low-cost, natural and abundant biopolymer, chitosan, in these nanocomposites ensures an enhanced number of active sites, making CDMNs both environmentally friendly and effective for water treatment. Herein, we have discussed methods to synthesize novel nanocomposites by cross-linking with chitosan and their application in the removal of toxic cationic, anionic, and azo dyes from aqueous solutions. Furthermore, different parameters assessed by various groups that impact the adsorption capacity of CDMNs are discussed, including the effect of pH, temperature, and contact time, as well as the precise interpretation of the underlying thermodynamic factors. The advantages and disadvantages of CDMNs are also highlighted along with the future outlook in this field of research.