Antibodies, which are important research entities in the field of biopharmaceuticals, hold a key position in the global pharmaceutical market. Nanobodies [a single-domain antibody (VHH)] have gradually shown unique advantages due to their specificity, small molecule size, high affinity, good stability, flexible delivery routes, and fast tissue penetration. The importance of nanobodies in the imaging, diagnosis, and treatment of diseases, especially tumors and autoimmune diseases, is increasing. This review addresses key technological hurdles, such as humanization, immunogenicity, and production scalability, and highlights novel strategies to overcome these challenges, including PEGylation, fusion with long-lived serum proteins, and advanced microbial expression systems. This review summarizes the characteristics, production, and industrialization of nanobodies, including nanobody-derived patents and clinical trials, from 2014 to 2023. Finally, the review explores some challenges associated with nanobody technology in biopharmaceuticals, therapeutic interventions, and diagnostic tools and potential solutions.