Monoclonal antibody (mAb) technology has become a powerful tool in the field of tumor-targeted diagnosis and therapy due to its antigen-binding specificity and capacity. However, the drawbacks of mAbs include weak tumor penetration, poor solubility and long retention time in vivo, thus limiting its clinical applications. Recently, single domain antigen-binding fragments known as “nanobodies” or as VHH were cloned from the naturally occurring heavy-chain-only antibodies in Camelid. The beneficial features such as small size, high solubility and stability, robust specificity, and good expression in microorganisms enable the nanobody technology to be used in a broad range of applications in fundamental research, biotechnology, disease diagnosis and therapy. In this review, we outline the current status of nanobody research including 1) the similarities and differences of nanobodies compared with conventional antibody fragments, 2) the framework of VHH production from camel immunization, VHH repertoire construction, VHH biopanning, and purification of recombinant VHH, and 3) the competitive advantages of nanobody-based delivery systems in molecular imaging and tumor-targeted cancer treatment over the conventional antibody usage.