Wastewater treatment by nanocomposites has gained significant attention as an innovative approach to address the growing global water scarcity and pollution challenges. This manuscript discusses nanocomposites’ application, challenges and prospects in wastewater treatment. Nanocomposites comprise nanomaterials with various matrices that offer many enhanced properties of pollutant removal efficiency. The nanocomposite’s key applications include membrane filtration, disinfection, adsorption, photocatalysis and water quality monitoring. Various types of nanocomposites, including metal/metal oxide, polymer-based, carbon-based, hybrid and magnetic nanocomposites, have been extensively researched for their unique characteristics and effectiveness in the treatment of wastewater. Nanocomposites-based treatments face numerous challenges, viz., environmental and health concerns, cost-effectiveness, scalability, selectivity, disposal issues and stability. To address these challenges, the continuous development of novel nanocomposites and integration with other technologies, along with the application of artificial intelligence (AI) in material design, are explored. The application of AI in material design is highlighted as a potential path for optimizing performance and overcoming challenges. This manuscript also highlights the need for management strategies, conducting comprehensive risk assessments, and addressing ethical concerns to ensure more efficient, cost-effective and sustainable solutions for the global water crisis through nanocomposites-based wastewater treatment.