Many newly discovered drug molecules have low aqueous solubility, which results in low bioavailability. One way to improve their dissolution is to formulate them as nanoparticles, which have high specific surface areas, consequently increasing the dissolution rate and solubility. Nanoparticles can be produced via top-down or bottom-up methods. Top-down techniques such as wet milling and high pressure homogenisation involve reducing large particles to nano-sizes. Some pharmaceutical products made by these processes have been marketed. Bottom-up methods such as precipitation and controlled droplet evaporation form nanoparticles from molecules in solution. To minimise aggregation upon drying and promote redispersion of the nanoparticles upon reconstitution or administration, hydrophilic matrix formers are added to the formulation. However, the nanoparticles will eventually agglomerate together after dispersing in the liquid and hinders dissolution. Currently there is no pharmacopoeial method specified for nanoparticles. Amongst the current dissolution apparatus available for powders, the flow-through cell has been shown to be the most suitable. Regulatory and pharmacopoeial standards should be established in the future to standardise the dissolution testing of nanoparticles. More nanoparticle formulations of new hydrophobic drugs are expected to be developed in the future with the advancement of nanotechnology. However, the agglomeration problem is inherent and difficult to overcome. Thus the benefit of dissolution enhancement often cannot be fully realised. On the other hand, chemical strategies such as modifying the parent drug molecule to form a more soluble salt form, prodrug, or cyclodextrin complexation are well established and have been shown to be effective in enhancing dissolution. Thus the value of nanoformulations needs to be interpreted in the light of their limitations. Chemical approaches should also be considered in new product development.