Paclitaxel (PTX), a taxane plant product, is one of the most effective broad-spectrum anti-cancer agents and approved for the treatment of a variety of cancers including ovarian, breast, lung, head and neck as well as Kaposi's sarcoma. Poor aqueous solubility and serious side effects associated with commercial preparation of PTX (Taxol®) triggered the development of alternative PTX formulations. Over past three decades, plethora of research work has been published towards the development of cremophor free and efficient formulations. Various nanocarrier systems including nanoparticles, liposomes, micelles, bioconjugates and dendrimers have been employed in order to improve PTX solubility and eliminate undesired side effects. These nanocarriers offer the advantage of high degree of encapsulation and cellular uptake, escape from elimination by P-glycoprotein (P-gp) mediated efflux, and can be explored for targeted drug delivery. The potential of these nanocarriers is reflected by the fact that various nanocarriers of PTX are in different stages of clinical trials and a few have already been commercialized including Abraxane®, Lipusu and Genexol PM®. This review focuses on the various challenges associated with PTX formulation development, limitations of existing formulations and novel approaches for the development of alternative formulations for PTX and also highlights the development of novel formulations in clinical settings.