Surface engineered nanoparticles (metallic and nonmetallic) have gained tremendous attention for precise imaging and therapeutics of cell/tumors at molecular and anatomic levels. These tiny agents have shown their specific physicochemical properties for early-stage disease diagnosis and cancer theranostics applications (imaging and therapeutics by a single system). For example, gold nanorods (AuNRs) demonstrate better photothermal response and radiodensity for theranostics applications. However, upon near infrared light exposure these AuNRs lose their optical property which is characteristic of phototherapy of cancer. To overcome this issue, silica coating is a safe choice for nanorods which not only stabilizes them but also provides extra space for cargo loading and makes them multifunctional in cancer theranostics applications. On the other hand, various small molecules have been coated on the surface of nanoparticles (organic, inorganic, and biological) which improve their biocompatibility, blood circulation time, specific biodistribution and tumor binding ability. A few of them have been reached in clinical trials, but, struggling with FDA approval due to engineering and biological barriers. Moreover, nanoparticles also face various challenges of reliability, reproducibility, degradation, tumor entry and exit in translational research. On the other hand, cargo carrier nanoparticles have been facing critical issues of premature leakage of loaded cargo either anticancer drug or imaging probes. Hence, various gate keepers (quantum dots to supramolecules) known nanovalves have been engineered on the pore opening of the cargo systems. Here, a review on the evolution of nanoparticles and their choice for diagnostics and therapeutics applications has been discussed. In this context, basic requirements of multifunctional theranostics design for targeted imaging and therapy have been highlighted and with several challenges. Major hurdles experienced in the surface engineering routes (coating to nanovalves approach) and limitations of the designed theranostics such as poor biocompatibility, low photostability, non-specific targeting, low cargo capacity, poor biodegradation and lower theranostics efficiency are discussed in-depth. The current scenario of theranostics systems and their multifunctional applications have been presented in this article.