Despite a growing focus from the academic community, the field of microfluidics has yet to produce many commercial devices for point-of-care (POC) diagnostics. One of the main reasons for this is the difficulty in producing low-cost, sensitive, and portable optical detection systems. Although electrochemical methods work well for certain applications, optical detection is generally regarded as superior and is the method most widely employed in laboratory clinical chemistry. Conventional optical systems, however, are costly, require careful alignment, and do not translate well to POC devices. Furthermore, many optical detection paradigms such as absorbance and fluorescence suffer at smaller geometries because the optical path length through the sample is shortened. This review examines the innovative techniques which have recently been developed to address these issues. We highlight microfluidic diagnostic systems which demonstrate practical integration of sample preparation, analyte enrichment, and optical detection. We also examine several emerging detection paradigms involving nanoengineered materials which do not suffer from the same miniaturization disadvantages as conventional measurements.