Light can be a powerful therapeutic and diagnostic tool. Light-sensitive molecules can be used to develop locally targeted cancer therapeutics. This approach is known as photodynamic therapy (PDT). Similarly, it is possible to diagnose diseases and track the course of treatment in vivo using ligh-sensitive molecules. This methodology is referred to as photodynamic diagnosis (PDD). Despite the potential, many PDT and PDD agents have imperfect physiochemical properties for their successful clinical application. Nanotechnology may solve these issues by improving the viability of PDT and PDD. This review summarizes the current state of PDT and PDD development, the integration of nanotechnology in the field, and the prospective future applications, demonstrating the potential of PDT and PDD for improved cancer treatment and diagnosis.