Nanocomposites have attracted a huge amount of interest due to their improved mechanical properties, dimensional stability, thermal/chemical stability, and electrical conductivity. Nanostructures are found to be of great significance because of their inherent properties such as large surface area to volume ratio and the engineered properties such as porosity, stability, and permeability. Composite material can achieve multifunctionality by combining the relevant, desirable features of different materials to form a new material having a broad spectrum of desired properties. These properties include liquid/gas sensing, self-repair nano/microstructure, catalysis initiator/inhibitor, as well as biomedical engineering. In this article, the nano/microcomposites are critically analyzed against the combination of functionalities i.e. mechanical, optical, chemical, electrical, and thermal properties. This review specifically presents a narrative summary on the use of multifunctional nanomaterials for energy as well as environmental applications, along with a discussion on some critical challenges existing in the fields.