Nanoparticles (NPs) have an outstanding position in pharmaceutical, biological, and medical disciplines. Polymeric NPs based on chitosan (CS) can act as excellent drug carriers because of some intrinsic beneficial properties including biocompatibility, biodegradability, non-toxicity, bioactivity, easy preparation, and targeting specificity. Drug transport and release from CS-based particulate systems depend on the extent of cross-linking, morphology, size, and density of the particulate system, as well as physicochemical properties of the drug. All these aspects have to be considered when developing new CS-based NPs as potential drug delivery systems. This review is summarizing and discussing recent advances in CS-based NPs being developed and examined for drug delivery including the following sections: (i) CS and its derivatives, basic characteristics of CS NPs, (ii) preparation procedures used for CS NPs, (iii) CS-based-nanocomposites with organic polymers and inorganic material, and (iv) implementations of CS NPs and nanocomposites in drug delivery.