The topical route is the most appropriate route for the targeted delivery of drugs to skin tissues for the treatment of local skin diseases; however, the stratum corneum (SC), the foremost layer of the skin, acts as a major barrier. Numerous passive and active drug delivery techniques have been exploited to overcome this barrier; however, these modalities are associated with several detrimental effects which restrict their clinical applicability. Alternatively, nanotechnology-aided interventions have been extensively investigated for the topical administration of a wide range of therapeutics. In this review, we have mainly focused on the biopharmaceutical significance of polymeric nanoparticles (PNPs) (made from natural polymers) for the treatment of various topical skin diseases such as psoriasis, atopic dermatitis (AD), skin infection, skin cancer, acute-to-chronic wounds, and acne. The encapsulation of drug(s) into the inner core or adsorption onto the shell of PNPs has shown a marked improvement in their physicochemical properties, avoiding premature degradation and controlling the release kinetics, permeation through the SC, and retention in the skin layers. Furthermore, functionalization techniques such as PEGylation, conjugation with targeting ligand, and pH/thermo-responsiveness have shown further success in optimizing the therapeutic efficacy of PNPs for the treatment of skin diseases. Despite enormous progress in the development of PNPs, their clinical translation is still lacking, which could be a potential future perspective for researchers working in this field.