Conventional energy storage systems, such as pumped hydroelectric storage, lead–acid batteries, and compressed air energy storage (CAES), have been widely used for energy storage. However, these systems face significant limitations, including geographic constraints, high construction costs, low energy efficiency, and environmental challenges. Among these, lead–acid batteries, despite their widespread use, suffer from issues such as heavy weight, sensitivity to temperature fluctuations, low energy density, and limited depth of discharge. Lithium-ion batteries (LIBs) have emerged as a promising alternative, offering portability, fast charging, long cycle life, and higher energy density. However, LIBs still face challenges related to limited lifespan, safety concerns (such as overheating), and environmental impact due to resource extraction and emissions. This review explores the introduction of nanotechnology as a transformative approach to enhance efficiency and overcome the limitations of LIBs. We provide an in-depth overview of various nanotechnology-based solutions for LIBs, focusing on their impact on energy density, cycle life, safety, and environmental sustainability. Additionally, we discuss advanced thermal analysis techniques used to assess and improve the performance of nanotechnology-enhanced LIBs. Finally, we examine the role of nanoparticles in the environmental remediation of LIBs, offering insights into how they can mitigate the ecological footprint of battery disposal and recycling. This review aims to highlight the potential of nanotechnology to revolutionize energy storage systems and address the growing demand for efficient and sustainable energy solutions.