The increasing use of nanomaterials in consumer and industrial products has aroused global concern regarding their fate in biological systems, resulting in a demand for parallel risk assessment. A number of studies on the effects of nanoparticles in in vitro and in vivo systems have been published. However, there is still a need for further studies that conclusively establish their safety/toxicity, due to the many experimental challenges and issues encountered when assessing the toxicity of nanomaterials. Most of the methods used for toxicity assessment were designed and standardized with chemical toxicology in mind. However, nanoparticles display several unique physicochemical properties that can interfere with or pose challenges to classical toxicity assays. Recently, some new methods and modified versions of pre-existing methods have been developed for assessing the toxicity of nanomaterials. This review is an attempt to highlight some important methods employed in nanomaterial toxicology and to provide a critical analysis of the major issues/challenges faced in this emerging field.