The emergence of plant- or animal-derived fiber-reinforced natural fiber composites (NFCs) enhances the field of nanotechnology, resulting in high-performing, sustainable smart materials. This chapter presents an overview of NFCs, including their processing methods, interfacial bonding, integration with smart and multifunctional material systems, progress and advancements, smart applications, and intrinsic challenges in the subject of nanotechnology. It discusses how nanomaterials such as carbon nanotubes, graphene, nanocellulose, and nanoclays overcome these limitations through improving interfacial adhesion, mechanical and thermal performance, and imparting electrical conductivity for self-sensing and multi-functionality. The chapter addresses processing techniques like solution mixing and melt blending, specifically focusing on dispersion, compatibility, and surface operations. The chapter also discusses the improvement in mechanical and physical attributes, such as tensile and impact strength, thermal conductivity, inflammability, flame resistance, and dielectric properties of nano-natural fiber composites and how these facilitate smart clothing, wearable sensors/actuators, structural health monitoring, and flexible energy storage (e.g., fiber supercapacitors). Case studies for automotive and construction include weight reduction, sound/thermal performance, and life cycle advantages, whereas sustainability analysis highlights biodegradability, recyclability pathways, and life cycle assessment outcomes. A new path is proposed for the integration of nanotechnology with artificial intelligence (AI) and digital manufacturing, circular-by-design strategies. Together, this chapter presents a state-of-the-art view to improve the NFC applications in various industrial and automotive sectors with a view to ethical and ecological sustainability.