We present a highly sensitive room-temperature atomic magnetometer (AM), designed for use in biomedical applications. The magnetometer sensor head is only 2 × 2 × 5 cm3 and is constructed using readily available, low-cost optical components. The magnetic field resolution of the AM is <10 fT Hz–1/2, which is comparable to cryogenically cooled superconducting quantum interference device (SQUID) magnetometers. We present side-by-side comparisons between our AM and a SQUID magnetometer, and show that equally high quality magnetoencephalography and magnetocardiography recordings can be obtained using our AM.