Nanotechnology is an emerging branch of science for designing tools and devices of size 1 to 100 nm with specific function at the cellular, atomic and molecular levels. The concept of employing nanotechnology in biomedical research and clinical practice is best known as nanomedicine. Nanomedicine is an upcoming field that could potentially make a major impact to human health. Nanomaterials are increasingly used in diagnostics, imaging and targeted drug delivery. Nanotechnology will assist the integration of diagnostics/imaging with therapeutics and facilitates the development of personalized medicine, i.e. prescription of specific medications best suited for an individual. This review provides an integrated overview of application of nanotechnology based molecular diagnostics and drug delivery in the development of nanomedicine and ultimately personalized medicine. Finally, we identify critical gaps in our knowledge of nanoparticle toxicity and how these gaps need to be evaluated to enable nanotechnology to transit safely from bench to bedside.