Nanoengineered multifunctional capsules with tailored structures and properties are of particular interest due to their multifunctions and potential applications as new colloidal structures in diverse fields. Among the available fabrication methods, the layer-by-layer (LbL) assembly of multilayer films onto colloidal particles followed by selective template removal has attracted extensive attention due to its advantages of precise control over the size, shape, composition, wall thickness and functions of the obtained capsules. The past decade has witnessed a rapid increase of research concerning the new fabrication strategies, functionalization and applications of this kind of capsules, particularly in the biomedical fields such as drug delivery, biosensors and bioreactors. In this critical review, the very recent progress of the multilayer capsules is summarized. First, the advances in assembly of capsules by the LbL technique are introduced with focus on tailoring the properties of hydrogen-bonded multilayer capsules by cross-linking, and fabrication of capsules based on covalent bonding and bio-specific interactions. Then the fabrication strategies which can speed up capsule fabrication are reviewed. In the following sections, the multi-compartmental capsules and the capsules that can transform their shape under stimulus are presented. Finally, the biomedical applications of multilayer capsules with particular emphasis on drug carriers, biosensors and bioreactors are described (306 references).