The increasing demand for convenient, miniaturized and multifunctional antibodies necessitates the development of novel antigen-recognition molecules for biological and medical studies. Nanobodies, the functional variable regions of camelid heavy-chain-only antibodies, as a new tool, complement the conventional antibodies and are in the stage of rapid development. The outstanding advantages of nanobodies include a stable structure, easy production, excellent water solubility, high affinity toward antigens and low immunogenicity. With promising application potential, nanobodies are now increasingly applied to various studies, including protein structure analysis, microscopic imaging, medical diagnosis, and drug development. The approval of the first nanobody drug Caplacizumab by the FDA disclosed the therapeutic potential of nanobodies. The outbreak of COVID-19 accelerated the development of nanobody drugs in non-injectable and bispecific biotherapeutic applications. Herein, we reviewed recent studies on the nanobody structure, screening and their applications in protein structure analysis and nanobody drugs, especially on non-injectable nanobody and bispecific nanobody development.