This review discusses different forms of nanomaterials generated from chitosan and its derivatives for controlled drug delivery. Nanomaterials are drug carriers with multiple features, including target delivery triggered by environmental, pH, thermal responses, enhanced biocompatibility, and the ability to cross the blood-brain barrier. Chitosan (CS), a natural polysaccharide largely obtained from marine crustaceans, is a promising drug delivery vector for therapeutics and diagnostics, owing to its biocompatibility, biodegradability, low toxicity, and structural variability. This review describes various approaches to obtain novel CS derivatives, including their distinct advantages, as well as different forms of nanomaterials recently developed from CS. The advanced applications of CS-based nanomaterials are presented here in terms of their specific functions. Recent studies have proven that nanotechnology combined with CS and its derivatives could potentially circumvent obstacles in the transport of drugs thereby improving the drug efficacy. CS-based nanomaterials have been shown to be highly effective in targeted drug therapy.