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Nanotechnology remains a relatively new innovation for the oil and gas industry. However, many applications have now become an integral part of some of its key technological processes. Nanotechnology is being widely applied, especially to improve the performance of drilling equipment, wellbore fluids, and improved/enhanced oil and gas recovery methods. Some drilling equipment, such as drilling bits and wellbore tubulars, are being fabricated using nanomaterials. Here, we review the evolution of relevant nanotechnology applications, manufacturing methods of suitable nanoparticles, their classification, and the various applications of nanotechnology in drilling engineering, especially related to drilling fluids. Applications involving water- and oil-based drilling fluids are reviewed. It is apparent that the nanoparticles used to date have tangibly improved several drilling processes. Silica and alumina nanoparticles have proved to be highly effective at improving the rheology, filtration, and thermal stability of drilling fluids. Environmental impacts and costs of materials/fluids are of paramount concern when selecting materials for deployment as drilling fluids, and these factors are addressed in this review. By providing a comprehensive understanding of existing, successful nanotechnology applications in drilling fluids, this review provides a guide to outstanding research issues to be solved and potential future applications in this field.