Laser ablation of solid targets in the liquid medium can be realized to fabricate nanostructures with various compositions (metals, alloys, oxides, carbides, hydroxides, etc.) and morphologies (nanoparticles, nanocubes, nanorods, nanocomposites, etc.). At the same time, the post laser irradiation of suspended nanomaterials can be applied to further modify their size, shape, and composition. Such fabrication and modification of nanomaterials in liquid based on laser irradiation has become a rapidly growing field. Compared to other, typically chemical, methods, laser ablation/irradiation in liquid (LAL) is a simple and “green” technique that normally operates in water or organic liquids under ambient conditions. Recently, the LAL has been elaborately developed to prepare a series of nanomaterials with special morphologies, microstructures and phases, and to achieve one-step formation of various functionalized nanostructures in the pursuit of novel properties and applications in optics, display, detection, and biological fields. The formation mechanisms and synthetic strategies based on LAL are systematically analyzed and the reported nanostructures derived from the unique characteristics of LAL are highlighted along with a review of their applications and future challenges.