Nanotechnology has revolutionized the field of biomedical sciences with smart approaches of imaging and treatment. This transformation has led to the development of a new field named ‘nanomedicine’, which has provided prospects for personalized medicines and offers hope for some rare diseases. In this context, the ability to manipulate various nanomaterials to suit diverse applications is a characteristic feature which has gained popularity. Nevertheless, the toxicity exerted by the nanomaterials has limited their lab-to-bench translations. Moreover, the noxiousness of nanomaterials has paved the emergence of another dedicated field named ‘nanotoxicology’. Therefore, it is essential to control nanomaterials’ toxicity and engineer nanomaterials with smart approaches for selective biomedical actions. Here we review engineered nanomaterials including metal and metal oxide, semiconductor, carbon-based, polymeric, and biological-based nanomaterials, and their potential applications in managing microbes, regenerative medicine, tissue engineering, dentistry, cancer treatment, personalized medications, and neglected rare diseases. We discuss the origin of nanotoxicity and how it is influenced by physicochemical properties of nanomaterials, synthesis methods, routes of administration, nano-bio-interface, and choice of the cell lines employed in the assessment. At the end, we discuss strategies and regulations adopted to mitigate the nanotoxicological concerns with future perspectives.