Technological developments in recent years have witnessed a paradigm shift towards lab‐on‐chip devices for various diagnostic applications. Lab‐on‐chip technology integrates several functions typically performed in a large‐scale analytical laboratory on a small‐scale platform. These devices are more than the miniaturized versions of conventional analytical and diagnostic techniques. The advances in fabrication techniques, material sciences, surface modification strategies, and their integration with microfluidics and chemical and biological‐based detection mechanisms have enormously enhanced the capabilities of these devices. The minuscule sample and reagent requirements, capillary‐driven pump‐free flows, faster transport phenomena, and ease of integration with various signal readout mechanisms make these platforms apt for use in resource‐limited settings, especially in developing and underdeveloped parts of the world. The microfluidic lab‐on‐a‐chip technology offers a promising approach to developing cost‐effective and sustainable point‐of‐care testing applications. Numerous merits of this technology have attracted the attention of researchers to develop low‐cost and rapid diagnostic platforms in human healthcare, veterinary medicine, food quality testing, and environmental monitoring. However, one of the major challenges associated with these devices is their limited sensitivity or the limit of detection. The use of functional nanomaterials in lab‐on‐chip microfluidic devices can improve the limit of detection by enhancing the signal‐to‐noise ratio, increasing the capture efficiency, and providing capabilities for devising novel detection schemes. This review presents an overview of state‐of‐the‐art techniques for integrating functional nanomaterials with microfluidic devices and discusses the potential applications of these devices in various fields.