Ferronickel, produced from the thermal upgrading of nickeliferous ores, is one of the feed materials for stainless steel production. However, traditional high-temperature smelting processes for producing ferronickel are facing increasing pressure due to environmental concerns and decreasing ore grades. The pyrometallurgical processing of low-grade laterites, aimed at achieving high production rates for ferronickel in an economically viable manner, is garnering increased attention. Thus, researchers have been widely investigating alternative processing methods for Ni laterite ores such as direct reduction followed by magnetic separation (DRMS). As there are significant variations in the composition of these ores and the experimental parameters examined by various researchers, there is a challenge to compile the body of knowledge generated to-date to guide the prospective extraction and separation processes. In this study, existing knowledge on the DRMS process is critically reviewed and summarized. Enrichment ratio and Ni separation efficiency are employed for a normalized comparison of various works. The effectiveness of thermal treatment and magnetic separation as an upgrading strategy for obtaining ferronickel from nickel laterite with varying composition and experimental conditions is assessed. The findings show that saprolites, even those containing low concentrations of Ni and Fe but with a high Ni/Fe ratio, are more responsive to the DRMS process than limonites. Additionally, to achieve high Ni separation efficiency, key process parameters such as feed Ni grade, and Ni/Fe ratio, as well as experimental parameters, e.g., temperature, particle size of the ground reduced product, and magnetic field strength need to be optimized. The evaluation of nickel recovered per ton of ore and the potential application of ferronickel concentrate produced by the DRMS process are also discussed.Graphical Abstract