The emergence of novel respiratory infections (e.g., COVID-19) and expeditious development of nanoparticle-based COVID-19 vaccines have recently reignited considerable interest in designing inhalable nanoparticle-based drug delivery systems as next-generation respiratory therapeutics. Among various available devices in aerosol delivery, dry powder inhalers (DPIs) are preferable for delivery of nanoparticles due to their simplicity of use, high portability, and superior long-term stability. Despite research efforts devoted to developing inhaled nanoparticle-based DPI formulations, no such formulations have been approved to date, implying a research gap between bench and bedside. This review aims to address this gap by highlighting important yet often overlooked issues during pre-clinical development. We start with an overview and update on formulation and particle engineering strategies for fabricating inhalable nanoparticle-based dry powder formulations. An important but neglected aspect in in vitro characterization methodologies for linking the powder performance with their bio-fate is then discussed. Finally, the major challenges and strategies in their clinical translation are highlighted. We anticipate that focused research onto the existing knowledge gaps presented in this review would accelerate clinical applications of inhalable nanoparticle-based dry powders from a far-fetched fantasy to a reality.