<p>Atopic dermatitis (AD), also known as eczema, is a chronic skin condition, affecting all ages, characterized by inflammation, itching, dryness, and redness, which can severely impact quality of life. Based on clinical features and symptoms, AD is of several types like contact dermatitis, dyshidrotic eczema, neurodermatitis, seborrheic dermatitis, stasis dermatitis, and nummular eczema. Its pathophysiology involves genetic, environmental, and immunological factors, leading to skin barrier dysfunction. Current treatments for AD involve a combination of pharmacological and non-pharmacological strategies tailored to individual needs. Management includes topical therapies of corticosteroids, calcineurin inhibitors, phosphodiesterase inhibitors, and janus kinase inhibitors in the form of gels, creams, ointments, and lotions. Systemic treatments like immunosuppressants and biologics are employed for severe cases. Long term and regular use of current treatments can lead to numerous adverse effects like skin thinning, atrophy, burning sensation, emergence of skin lymphomas, tolerance, and systemic side effects. Emerging topical nanoformulations, such as lipid-based nanoparticles, polymeric carriers, liposomes, cubosomes, ethosomes, nanoemulsions enhance drug delivery, improve therapeutic outcomes, and reduce toxicity, making them promising options for AD treatment. Clinical trials of nanoformulations for AD show significant improvements in treatment efficacy and skin absorption compared to conventional therapies. However, nanomedicine faces challenges in terms of inadequate evaluation studies and formulation instability, requiring stringent regulatory compliance and a thorough preclinical and clinical data investigation. This review aims to describe types of AD, its pathophysiology and current treatments and their challenges. The review further focuses on emerging trends of various nanoformulations for treatment of AD.</p> Graphical Abstract <p></p>