Nanotechnology is an emerging field of research that provides scientists, the opportunity to manipulate matter at atomic and molecular scale. In the field of nanomedicine, nanocarriers are being engineered for targeted drug delivery so as to increase the efficacy and reduce the systemic side effects of the administered drug. This has been fruitful for various chemotherapeutic drugs. Their use in bone diseases is still at its infancy and there is still a long way to go. They are being evaluated as drug carriers for treatment of various bone diseases like tumours, osteoarthritis and osteomyelitis. Nanocarriers exploit the phenomenon of passive targeting through enhanced permeability and retention effect and active targeting by bisphosphonates to preferentially deliver drugs to bone tumours. Also nanoparticles are being tried as scaffolds for bone tissue engineering. This review focuses on the potential of nanotechnology in treating diseases of bone and bone tissue engineering.