Lipid nanoparticles (LNPs) have emerged as a powerful non-viral carrier for drug delivery. With the prevalence of respiratory diseases, particularly highlighted by the current COVID-19 pandemic, investigations into applying LNPs to deliver inhaled therapeutics directly to the lungs are underway. The progress in LNP development as well as the recent pre-clinical studies in three main classes of inhaled encapsulated drugs: small molecules, nucleic acids and proteins/peptides will be discussed. The advantages of the pulmonary drug delivery system such as reducing systemic toxicity and enabling higher local drug concentration in the lungs are evaluated together with the challenges and design considerations for improved formulations. This review provides a perspective on the future prospects of LNP-mediated delivery of inhaled therapeutics for respiratory diseases.