Nanomaterials (NMs) are increasingly used for the therapy, diagnosis, and monitoring of disease- or drug-induced mechanisms in the human biological system. In view of their small size, after certain modifications, NMs have the capacity to bypass or cross the blood–brain barrier. Nanotechnology is particularly advantageous in the field of neurology. Examples may include the utilization of nanoparticle (NP)-based drug carriers to readily cross the blood–brain barrier to treat central nervous system (CNS) diseases, nanoscaffolds for axonal regeneration, nanoelectromechanical systems in neurological operations, and NPs in molecular imaging and CNS imaging. However, NPs can also be potentially hazardous to the CNS in terms of nano-neurotoxicity via several possible mechanisms, such as oxidative stress, autophagy, and lysosome dysfunction, and the activation of certain signaling pathways. In this review, we discuss the dual effect of NMs on the CNS and the mechanisms involved. The limitations of the current research are also discussed.