Carbon nanotubes (CNTs) have recently been in the limelight for their potential role in disease diagnostics and therapeutics, as well as in tissue engineering. Before these medical applications can be realized, there is a need to address issues like opsonization, phagocytosis by macrophages, and sequestration to the liver and spleen for eventual elimination from the body; along with equally important issues such as aqueous solubility, dispersion, biocompatibility, and biofunctionalization. CNTs have not been shown to be able to evade such biological obstacles, which include their nonspecific attachments to cells and other biological components in the bloodstream, before reaching target tissues and cells in vivo. This will eventually determine their longevity in circulation and clearance rate from the body. This review article discusses the current status, challenges, practical strategies, and implementations of coating CNTs with biocompatible and opsonin-resistant moieties, rendering CNTs transparent to opsonins and deceiving the innate immune response to make believe that the CNTs are not foreign. A holistic approach to the development of such “stealth” CNTs is presented, which encompasses not only several biophysicochemical factors that are not limited to surface treatment of CNTs, but also extraneous biological factors such as the protein corona formation that inevitably controls the in vivo fate of the particles. This review also discusses the present and potential applications, along with the future directions, of CNTs and their hybrid-based nanotheranostic agents for multiplex, multimodal molecular imaging and therapy, as well as in other applications, such as drug delivery and tissue engineering.