The use of nanomaterials- and nanotechnology-based processes is growing at a tremendous rate in all fields of science and technology. Textile industry is also experiencing the benefits of nanotechnology in its diverse field of applications. Textile-based nanoproducts starting from nanocomposite fibers, nanofibers to intelligent high-performance polymeric nanocoatings are getting their way not only in high performance advanced applications but nanoparticles are also successfully being used in conventional textiles to impart new functionality and improved performance. Greater repeatability, reliability and robustness are the main advantages of nanotechnological advancements in textiles. Nanoparticle application during conventional textile processing techniques, such as finishing, coating and dyeing, enhances the product performance manifold and imparts hitherto unachieved functionality. New coating techniques like sol-gel, layer-by-layer, plasma polymerization etc. can develop multi-functionality, intelligence, excellent durability and weather resistance to fabrics. The present paper focuses on the development and potential applications of nanotechnology in developing multifunctional and smart nanocomposite fibers, nanofibers and other new finished and nanocoated textiles. The four main areas of textile chemical processing, namely nanofinishing, nanocoating, nanocomposite coating and nanodyeing, are covered in the first section of this paper and the second section deals with developments in nanocomposite fibers and nanofibers. The influence of nanomaterials in textile finishing and processing to enhance product performance is discussed. Nanocoating is a relatively new technique in the textile field and is currently under research and development. Polymeric nanocomposite coatings, where nanoparticles are dispersed in polymeric media and used for coating applications, are the most promising route to develop multifunctional and intelligent high-performance textiles. Not much research has been done on applying the concept of nanotechnology in dyeing of textiles except a few reports on dye particle size reduction, structural change in fibers or the surface etching of textiles to create nanostructured surfaces. The reduction in water consumption during nanotechnology applications in textile processing has the potential to control the effluent problems of a textile process house. The most researched area to produce multifunctional, smart fibers is the preparation of nanocomposite fibers where the exceptional properties of nanoparticles have been utilized to enhance and impart several functionalities on conventional textile grade fibers. Nanofibers are gaining popularity in some specialized technical applications such as filter fabric, antibacterial patches and chemical protective suits. Nanotechnological advances in these two areas of nanocomposite fibers and nanofibrous forms have also been reviewed.