Traditional hydrogels usually possess inferior mechanical properties as well as lacking multi-functionalities. Nano-sized particles/fillers, both inorganic and organic materials, have unique chemical, physical, and biological functions, and have been extensively studied as biomaterials or bio-functional materials. Nanocomposite hydrogels, which combine the advantages of both nano-fillers and hydrogel matrices, may result in improved mechanical and biological properties and find their potential applications in biomedical field. This paper reviews recent developments in the synthesis, preparation, and characterization of nanocomposite hydrogels; their biomedical applications, such as drug delivery matrices and tissue engineering scaffolding materials are also summarized.