The delivery of drugs and cosmetic actives to the skin by nanoparticle formulations has a number of advantages over conventional formulations. Nanoparticle formulations offer protection of incorporated active compounds against chemical degradation, more flexibility in modulating the release of the compound, the use of well-tolerated excipients, and feasibility of large scale production. The materials used in the nanoparticle synthesis and formulation can influence product stability, active ingredient properties and delivery to the intended site of action. This review describes the characteristics and application of various polymeric and lipid materials in the preparation of nanoparticles for topical and transdermal drug delivery.