The new severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that causes the coronavirus disease 2019 (COVID-19) has significantly altered people's way of life. Despite widespread knowledge of vaccination, mask use, and avoidance of close contact, COVID-19 is still spreading around the world. Numerous research teams are examining the SARS-CoV-2 infection process to discover strategies to identify, prevent, and treat COVID-19 to limit the spread of this chronic coronavirus illness and restore lives to normalcy. Nanobodies have advantages over polyclonal and monoclonal antibodies (Ab) and Ab fragments, including reduced size, high stability, simplicity in manufacture, compatibility with genetic engineering methods, and lack of solubility and aggregation issues. Recent studies have shown that nanobodies that target the SARS-CoV-2 receptor-binding domain and disrupt ACE2 interactions are helpful in the prevention and treatment of SARS-CoV-2-infected animal models, despite the lack of evidence in human patients. The creation and evaluation of nanobodies, as well as their diagnostic and therapeutic applications against COVID-19, are discussed in this paper.