Nanobodies (Nbs) are the variable domain of heavy‐chain antibodies derived from the blood of camelids or sharks. Nanobodies are the smallest antibody fragment with intact antigen‐binding ability. Compared to conventional antibodies, nanobodies have unique properties such as small size, excellent stability and solubility, low immunogenicity, ability to recognize hidden epitopes, high tissue penetration, and industrialized production. More excitingly, the camelid‐specific amino acid sequences in the framework are mutated to their human heavy‐chain variable domain equivalent, which is humanized, to a wide range of applications. These superior characteristics make nanobody an ideal alternative to conventional antibody, showing excellent prospects for various applications in structural biology, molecular imaging, disease diagnosis and therapy, agricultural products, and environmental chemicals detection. With the continuous updating of theories and the rapid development of technology, the screening and expression methods of nanobodies are increasingly mature. Consequently, several technologies to identify and express nanobodies have been established, and various use cases have been described. In this review, we summarize recent advances in the discovery and production of novel nanobodies, and their use in detection and diagnosis platforms.