Colloidal gold solutions have been used for centuries in a wide variety of applications including staining glass and in the colouring of ceramics. More recently, gold nanoparticles (GNPs) have been studied extensively due to their interesting size-dependent electronic and optical properties. GNPs can be functionalized easily with biomolecules that contain thiols, amines, or even phosphine moieties. For example, the reaction of thiol-containing peptides with GNPs has been used extensively to prepare novel hybrid materials for biomedical applications. A range of different types of peptides can be used to access biomaterials that are designed to perform a specific role such as cancer cell targeting. In addition, specific peptide sequences that are responsive to external stimuli (e.g. temperature or pH) can be used to stabilise/destabilise the aggregation of colloidal GNPs. Such systems have exciting potential applications in the field of colorimetric sensing (including bio-sensing) and in targeted drug delivery platforms. In this review, we will give an overview of the current methods used for preparing peptide functionalized GNPs, and we will discuss their key properties outlining the various applications of this class of biomaterial. In particular, the potential applications of peptide functionalized GNPs in areas of sensing and targeted drug delivery will be discussed.