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Paper-based analytical devices (PADs), including lateral flow assays (LFAs), dipstick assays and microfluidic PADs (μPADs), have a great impact on the healthcare realm and environmental monitoring. This is especially evident in developing countries because PADs-based point-of-care testing (POCT) enables to rapidly determine various (bio)chemical analytes in a miniaturized, cost-effective and user-friendly manner. Low sensitivity and poor specificity are the main bottlenecks associated with PADs, which limit the entry of PADs into the real-life applications. The application of nanomaterials in PADs is showing great improvement in their detection performance in terms of sensitivity, selectivity and accuracy since the nanomaterials have unique physicochemical properties. In this review, the research progress on the nanomaterial-based PADs is summarized by highlighting representative recent publications. We mainly focus on the detection principles, the sensing mechanisms of how they work and applications in disease diagnosis, environmental monitoring and food safety management. In addition, the limitations and challenges associated with the development of nanomaterial-based PADs are discussed, and further directions in this research field are proposed.