Present and past anthropogenic pollution of the hydrosphere and lithosphere is a growing concern around the world for sustainable development and human health. Current industrial activity, abandoned contaminated plants and mining sites, and even everyday life is a pollution source for our environment. There is therefore a crucial need to clean industrial and municipal effluents and remediate contaminated soil and groundwater. Nanosized zero-valent iron (nZVI) is an emerging material in these fields due to its high reactivity and expected low impact on the environment due to iron’s high abundance in the earth crust. Currently, there is an intensive research to test the effectiveness of nZVI in contaminant removal processes from water and soil and to modify properties of this material in order to fulfill specific application requirements. The number of laboratory tests, field applications, and investigations for the environmental impact are strongly increasing. The aim of the present review is to provide an overview of the current knowledge about the catalytic activity, reactivity and efficiency of nZVI in removing toxic organic and inorganic materials from water, wastewater, and soil and groundwater, as well as its toxic effect for microorganisms and plants.