Carbon nanotubes (CNTs) are allotropes of carbon, composed of carbon atoms forming a tube-like structure. Their high surface area, chemical stability, and rich electronic polyaromatic structure facilitate their drug-carrying capacity. Therefore, CNTs have been intensively explored for several biomedical applications, including as a potential treatment option for cancer. By incorporating smart fabrication strategies, CNTs can be designed to specifically target cancer cells. This targeted drug delivery approach not only maximizes the therapeutic utility of CNTs but also minimizes any potential side effects of free drug molecules. CNTs can also be utilised for photothermal therapy (PTT) which uses photosensitizers to generate reactive oxygen species (ROS) to kill cancer cells, and in immunotherapeutic applications. Regarding the latter, for example, CNT-based formulations can preferentially target intra-tumoural regulatory T-cells. CNTs also act as efficient antigen presenters. With their capabilities for photoacoustic, fluorescent and Raman imaging, CNTs are excellent diagnostic tools as well. Further, metallic nanoparticles, such as gold or silver nanoparticles, are combined with CNTs to create nanobiosensors to measure biological reactions. This review focuses on current knowledge about the theranostic potential of CNT, challenges associated with their large-scale production, their possible side effects and important parameters to consider when exploring their clinical usage.