The use of nanotechnology in drug delivery and imaging in vivo is a rapidly expanding field. The emphases of this review are on biophysical attributes of the drug delivery and imaging platforms as well as the biological aspects that enable targeting of these platforms to injured and diseased tissues and cells. The principles of passive and active targeting of nanosized carriers to inflamed and cancerous tissues with increased vascular leakiness, overexpression of specific epitopes, and cellular uptake of these nanoscale systems are discussed. Preparation methods-properties of nanoscale systems including liposomes, micelles, emulsions, nanoparticulates, and dendrimer nanocomposites, and clinical indications are outlined separately for drug delivery and imaging in vivo. Taken together, these relatively new and exciting data indicate that the future of nanomedicine is very promising, and that additional preclinical and clinical studies in relevant animal models and disease states, as well as long-term toxicity studies, should be conducted beyond the "proof-of-concept" stage. Large-scale manufacturing and costs of nanomedicines are also important issues to be addressed during development for clinical indications.