In these days, the significance of fiber optic sensors has exceptionally increased due to technological advances in modern society. Nowadays, researchers are attracted toward the development of a sensor that possesses the integration of both fiber optic sensors and nanocomposite thin film to improve the sensor’s performance. Thin-film nanomaterial based optical fiber sensors have great potential applications, namely, gas sensing, chemical sensing, biomolecules, food plant, industrial hazards, safety issues, drug monitoring, and heavy metal detections. There are various techniques, namely, evanescent field absorption spectroscopy, fiber Bragg grating (FBG), long-period grating (LPG), ringdown spectroscopy, surface plasmon resonance (SPR), Mach–Zehnder interferometer (MZI) techniques, and so on, which are used for the development of fiber optic sensors that are majorly emphasized in the current article. Numerous scientific researchers have demonstrated that functionalized fiber optic sensors are found more beneficial in terms of improvement of the sensing performance, such as sensitivity, repeatability, response time, specificity, recovery time, and repeatability. Henceforth, in this review article, we have focused on these requisite sensing parameters in detail. Furthermore, to keep human beings healthy, it is our responsibility to develop a sensor that can monitor the optimum toxic concentrations accurately. Thus, the monitoring of industrial environmental pollutants, such as NH3, ethylenediamine, alcohol, and acetone, is immensely important to save human lives on Earth. In the report, all the details of the target analytes, such as optimum concentrations, adverse effects on human beings, and monitoring techniques, are discussed.