Chitosan is a fibrous compound derived from chitin, which is the second most abundant natural polysaccharide and is produced by crustaceans, including crabs, shrimps, and lobsters. Chitosan has all of the important medicinal properties, including biocompatibility, biodegradability, and hydrophilicity, and it is relatively nontoxic and cationic in nature. Chitosan nanoparticles are particularly useful due to their small size, providing a large surface-to-volume ratio, and physicochemical properties that may differ from that of their bulk counterparts; thus, chitosan nanoparticles (CNPs) are widely used in biomedical applications and, particularly, as contrast agents for medical imaging and as vehicles for drug and gene delivery into tumors. Because CNPs are formed from a natural biopolymer, they can readily be functionalized with drugs, RNA, DNA, and other molecules to target a desired result in vivo. Furthermore, chitosan is approved by the United States Food and Drug Administration as being Generally Recognized as Safe (GRAS). This paper reviews the structural characteristics and various synthesis methods used to produce chitosan nanoparticles and nanostructures, such as ionic gelation, microemulsion, polyelectrolyte complexing, emulsification solvent diffusion, and the reverse micellar method. Various characterization techniques and analyses are also discussed. In addition, we review drug delivery applications of chitosan nanoparticles, including for ocular, oral, pulmonary, nasal, and vaginal methodologies, and applications in cancer therapy and tissue engineering.