Hydrogels are an important class of soft materials with elastic and intelligent properties. Nevertheless, these traditional hydrogels usually possess poor mechanical properties and limited functions, which greatly restrict their further applications. With the rapid development of nanotechnology, there have been significant advances in the design and fabrication of functional nanocomposite hydrogels with unique properties and functions. Among various materials, nanosheets with planar topography, large specific surface areas, and versatile physicochemical properties have attracted intense research interest. Herein, this review summarises the synthesis mechanisms, fundamental properties, and promising applications of nanosheet-incorporated hydrogels. In particular, how the nanosheet structure is applied to improve the overall performance of the hydrogel in each application is emphasized. Additionally, the current challenges and prospects are briefly discussed in this area. We expect that the combination of nanosheets and hydrogels can attract more researchers' interest and bring new opportunities in the future.