<p>Advances in understanding tumor heterogeneity and the tumor microenvironment (TME) have ushered in a new era of targeted and immunotherapy. Both targeted and immunotherapy mainly rely on the use of specific antibodies against the tumor targets. Although monoclonal antibodies (mAbs) have achieved tremendous success, the full potential of these full-size antibodies is hampered by the large size, low tumor permeability, and uneven biodistribution, which will obstruct the clinical treatment outcome. Nanobodies (Nbs), derived from camelid heavy-chain antibodies, offer a revolutionary alternative due to their unique structural and functional properties. This review highlights the beneficial characteristics of Nbs, notably their ability to access hidden epitopes and penetrate dense TME, along with a favorable immunogenic profile. Their therapeutic applications in cancer are explored across multiple fronts: from monovalent and multivalent constructs targeting receptor tyrosine kinases and other cancer-related molecules to serving as delivery vehicles for drugs, radionuclides, and photosensitizers. In immunotherapy, Nbs play a pivotal role by activating immune cells, blocking immune checkpoints, and enhancing adoptive cell therapies. Despite challenges like rapid renal clearance, engineering and humanization strategies are advancing Nbs toward improved efficacy and safety in oncology. This review provides a comprehensive overview of current Nb-based therapies, their mechanisms, and future directions in oncology.</p>