In recent years tremendous effort has been invested in the field of cancer diagnosis and treatment with an overall goal of improving cancer management, therapeutic outcome, patient survival, and quality of life. Photodynamic Therapy (PDT), which works on the principle of light-induced activation of photosensitizers (PS) leading to Reactive Oxygen Species (ROS) mediated cancer cell killing has received increased attention as a promising alternative to overcome several limitations of conventional cancer therapies. Compared to conventional therapies, PDT offers the advantages of selectivity, minimal invasiveness, localized treatment, and spatio-temporal control which minimizes the overall therapeutic side effects and can be repeated as needed without interfering with other treatments and inducing treatment resistance. Overall PDT efficacy requires proper planning of various parameters like localization and concentration of PS at the tumor site, light dose, oxygen concentration and heterogeneity of the tumor microenvironment, which can be achieved with advanced imaging techniques. Consequently, there has been tremendous interest in the rationale design of PS formulations to exploit their theranostic potential to unleash the imperative contribution of medical imaging in the context of successful PDT outcomes. Further, recent advances in PS formulations as activatable phototheranostic agents have shown promising potential for finely controlled imaging-guided PDT due to their propensity to specifically turning on diagnostic signals simultaneously with photodynamic effects in response to the tumor-specific stimuli. In this review, we have summarized the recent progress in the development of PS-based multifunctional theranostic agents for biomedical applications in multimodal imaging combined with PDT. We also present the role of different imaging modalities; magnetic resonance, optical, nuclear, acoustic, and photoacoustic in improving the pre-and post-PDT effects. We anticipate that the information presented in this review will encourage future development and design of PSs for improved image-guided PDT for cancer treatment.