Nanobodies are the smallest known antigen-binding molecules to date. Their small size, good tissue penetration, high stability and solubility, ease of expression, refolding ability, and negligible immunogenicity in the human body have granted them excellence over conventional antibodies. Those exceptional attributes of nanobodies make them promising candidates for various applications in biotechnology, medicine, protein engineering, structural biology, food, and agriculture. This review presents an overview of their structure, development methods, advantages, possible challenges, and applications with special emphasis on infectious diseases-related ones. A showcase of how nanobodies can be harnessed for applications including neutralization of viruses and combating antibiotic-resistant bacteria is detailed. Overall, the impact of nanobodies in vaccine design, rapid diagnostics, and targeted therapies, besides exploring their role in deciphering microbial structures and virulence mechanisms are highlighted. Indeed, nanobodies are reshaping the future of infectious disease prevention and treatment.