Long gone was the time when tumors were thought to be insular masses of cells, residing independently at specific sites in an organ. Now, researchers gradually realize that tumors interact with the extracellular matrix (ECM), blood vessels, connective tissues and immune cells in their environment, which is now known as the tumor microenvironment (TME). It is found that the interactions between tumors and their surrounding promote tumor growth, invasion and metastasis. The dynamics and diversity of TME cause the tumors to be heterogeneous and thus pose a challenge for cancer diagnosis, drug design and therapy. As TME is significant in enhancing tumor progression, it is vital to identify the different components in the TME. This review explores how different factors in the TME supply tumors with the required growth factors and signaling molecules to proliferate, invade and metastasis. We also examine the development of TME-targeted nanotheranostics over the recent years for cancer therapy, diagnosis and anticancer drug delivery system. This review further discusses the limitations and future perspective of nanoparticle based theranostics when used in combination with current imaging modalities like Optical Imaging, Magnetic Resonance Imaging (MRI) and Nuclear Imaging (PET and SPECT).