Rapid innovations in nanomedicine have increased the likelihood that engineered nanomaterials will eventually come in contact with humans and the environment. The advent of nanotechnology has created strong interest in many fields such as biomedical sciences and engineering field. Central to any significant advances in nanomaterial based applications will be the development of functionalized nanoparticles, which are believed to hold promise for use in fields such as pharmaceutical and biomedical sciences. Early clinical results have suggested that functionalization of nanoparticles with specific recognition chemical moieties indeed yields multifunctional nanoparticles with enhanced efficacy, while simultaneously reducing side effects, due to properties such as targeted localization in tumors and active cellular uptake. A prerequisite for advancing this area of research is the development of chemical methods to conjugate chemical moieties onto nanoparticles in a reliable manner. In recent years a variety of chemical methods have been developed to synthesize functionalized nanoparticles specifically for drug delivery, cancer therapy, diagnostics, tissue engineering and molecular biology, and the structure-function relationship of these functionalized nanoparticles has been extensively examined. With the growing understanding of methods to functionalize nanoparticles and the continued efforts of creative scientists to advance this technology, it is likely that functionalized nanoparticles will become an important tool in the above mentioned areas. Therefore, the aim of this review is to provide basic information on nanoparticles, describe previously developed methods to functionalize nanoparticles and discuss their potential applications in biomedical sciences. The information provided in this review is important in regards to the safe and widespread use of functionalized nanoparticles particularly in the biomedicine field.