With the increasing use and development of engineered nanoparticles in electronics, consumer products, pesticides, food and pharmaceutical industries, there is a growing concern about potential human health hazards of these materials. A number of studies have demonstrated that nanoparticle toxicity is extremely complex, and that the biological activity of nanoparticles will depend on a variety of physicochemical properties such as particle size, shape, agglomeration state, crystal structure, chemical composition, surface area and surface properties. Nanoparticle toxicity can be attributed to nonspecific interaction with biological structures due to their physical properties (e.g., size and shape) and biopersistence, or to specific interaction with biomolecules through their surface properties (e.g., surface chemistry and reactivity) or release of toxic ions. The toxic effects of most nanomaterials have not been adequately characterized and currently, there are many issues and challenges in toxicity testing and risk assessment of nanoparticles. Based on the possible mechanisms of action and available in vitro and in vivo toxicity database, this paper proposes an approach to using mechanism-based SAR analysis to assess the relative human health hazard/risk potential of various types of nanomaterials.