<p>The rising demand for lightweight, high-performance materials has intensified interest in graphene-based polymer nanocomposites (GPNCs). Yet, despite graphene’s exceptional intrinsic properties, its translation into industrial applications has been hindered by the strong tendency of graphene and graphene oxide (GO) sheets to agglomerate within polymer matrices, a consequence of dominant π-π stacking and van der Waals attractions. This aggregation undermines dispersion uniformity and significantly reduces composite performance. Functionalization has therefore emerged as a pivotal strategy for overcoming these limitations. This review provides a comprehensive and critical analysis of the evolution of GO and functionalized GO (fGO) in polymer nanocomposites (PNCs), with detailed coverage of both covalent and non-covalent modification approaches. We discuss how functionalization not only enhances dispersion but also preserves the essential characteristics of GO, enabling its effective integration into diverse polymer systems. A central component of this review is a comparative evaluation of GO- and fGO-based nanocomposites, examining how mechanical, thermal, electrical, rheological, and barrier enhancements are governed by factors such as dispersion quality, chemical functionality, filler orientation and size, processing conditions, and intrinsic filler properties. By synthesizing recent advancements and addressing critical gaps in existing literature, this review serves as a valuable resource for researchers and engineers. Furthermore, we highlight the expanding application landscape of these materials, from self-healing and shape-memory systems to aerospace structures, ballistic protection, EMI shielding, hydrogen storage, food packaging, and water purification, aiming to inspire innovation and accelerate the development of next-generation graphene-reinforced polymer nanocomposites for a wide range of industries.</p>