Nanofiber technology is an exciting area attracting the attention of many researchers as a potential solution to the current challenges in the biomedical field such as burn and wound care, organ repair, and treatment for osteoporosis and various diseases. Nanofibers are attractive in this field for several reasons. First, surface area on nanofibers is much higher compared to bulk materials, which allows for enhanced adhesion of cells, proteins, and drugs. Second, nanofibers can be fabricated into sophisticated macro‐scale structures. The ability to fabricate nanofibers allows renewed efforts in developing hierarchical structures that mimic those in animals and human. On top of that, a wide range of polymers can be fabricated into nanofibers to suit different applications. Nanofibers are most commonly fabricated through electrospinning, which is a low cost method that allows control over fiber morphology and is capable of being scaled‐up for mass production. This review explored two popular areas of biomedical nanofiber development: tissue regeneration and drug delivery, and included discussions on the basic principles for how nanofibers promote tissue regeneration and drug delivery, the parameters that affect nanofiber performance and the recent progress in these areas. The recent work on biomedical nanofibers showed that the large surface area on nanofibers could be translated into enhanced cell activities, drug encapsulation, and drug release rate control. Furthermore, by optimizing the electrospinning process via adjusting the material choices and fiber orientation, for example, further enhancement in cell differentiation and drug release control could be achieved. Copyright © 2010 John Wiley & Sons, Ltd.