Nanotechnology has wide applications in many fields, especially in the biological sciences and medicine. Nanomaterials are applied as coating materials or in treatment and diagnosis. Nanoparticles such as titania, zirconia, silver, diamonds, iron oxides, carbon nanotubes, and biodegradable polymers have been studied in diagnosis and treatment. Many of these nanoparticles may have toxic effects on cells. Many factors such as size, inherent properties, and surface chemistry may cause nanoparticle toxicity. There are methods for improving the performance and reducing toxicity of nanoparticles in medical design, such as biocompatible coating materials or biodegradable/biocompatible nanoparticles. Most metal oxide nanoparticles show toxic effects, but no toxic effects have been observed with biocompatible coatings. Biodegradable nanoparticles are also used in the efficient design of medical materials, which will be reviewed in this article.