Magnetostrictive polymer composites (MPCs) are a class of materials having the ability to change dimensions, elastic and electromagnetic properties under the presence of a magnetic field. Their advantages over bulk magnetostrictive metals are high resistivity, extended frequency response, lightness, easy formability and improved mechanical properties. In this review, advances in MPCs and their applications since the year 2000 are presented. A wide range of reinforcements and morphologies used to generate magnetostrictive response in polymers are considered, ranging from carbonyl iron, nickel to rare-earth based metal alloys. A critical analysis of the various polymeric systems from stiff thermosets to soft elastomers is provided, focusing on how the material selection influences the magnetorheological and magnetoelectric properties. Multiscale approaches, such as continuum micromechanics based theories and multi-physics finite element approaches, for modeling the coupled magneto-elastic responses are also reviewed. Recognizing their unique electromagnetic properties, recent applications of MPCs in electric current and stress sensing, vibration damping, actuation, health monitoring and biomedical fields are presented. The review of the literature points to new directions for fundamental research, interface studies and modeling improvements that can help in advancing this emerging area of magnetostrictive polymer composites.