A nanobody (Nb) is a registered trademark of Ablynx, referring to the single antigen‐binding domain of heavy chain‐only antibodies (HCAbs) that are circulating in Camelidae. Nbs are produced recombinantly in micro‐organisms and employed as research tools or for diagnostic and therapeutic applications. They were – and still are – also named single‐domain antibodies (sdAbs) or variable domain of the heavy chain of HCAbs (VHH). A variety of methods are currently in use for the fast and efficient generation of target‐specific Nbs. Such Nbs are produced at low cost and associate with high affinity to their cognate antigen. They are robust, strictly monomeric and easy to tailor into more complex entities to meet the requirements of their application. Here, we review the various sources and different strategies that have been developed to identify rapidly, target‐specific Nbs. We further discuss a variety of engineering technologies that have been explored to broaden the application range of Nbs and summarise those applications where designed Nbs might offer a marked advantage over other affinity reagents.