Nanoparticles are among the most attractive nanostructures foreseen to significantly propel diagnostic and therapeutic applications to new frontiers. An assortment of nanoparticles, of different sizes, shapes, composition, chemical and surface properties, have already been constructed. Nanoparticles have unique electrical properties and make excellent semiconductors and imaging agents. Their extremely small size allows them to penetrate cells and interact with cellular molecules. Super-paramagnetic iron oxide nanoparticles are useful as MRI contrast agents and have also been used for bioseparations and targeted delivery of drugs or DNA. Quantum dots (QDs) are semiconductor nanocrystals that can emit intense and stable light in all colors of the rainbow, depending on their size. QDs of different sizes can be simultaneously excited by a single wavelength far removed from their respective emissions, thus enabling multiplex diagnostics. Conjugation of QDs to biomolecules adapts them for target recognition. Colloidal gold nanoparticles exhibit surface-plasmon resonance-enhanced optical properties and can also be conjugated to biomolecules, providing possibilities for tissue targeting and imaging. They can also be used to destroy tissues by local heating or release payload of therapeutic drugs by utilizing the fact that electrons of the gold resonate in response to incoming radiation causing them to both absorb and scatter light. Finally, biodegradable nanoparticles made from different polymers have been assessed for sustained and targeted drug delivery.More work is necessary to assess toxicity of nanoparticles and fully optimize their use for medical applications. In this presentation, properties and advantages of several nanoparticles are reviewed. The use of nanoparticles to develop novel diagnostic assays and smart drug delivery systems are introduced along with a discussion of related regulatory framework.