Recent developments in the field of nanotechnology involving the synthesis of novel nanomaterials (NM) have attracted the attention of numerous scientists owing to the possibility of degradative perturbations in human health. This Review evaluates previous investigations related to NM toxicity studies using biological models and describes the limitations that often prevent toxicologists from identifying whether NM pose a real hazard to human health. One major limitation to assess toxicity is the characterization of the NM prior to and after exposure to living cells or animals. The most relevant physicochemical characteristics of NM are: size, surface chemistry, crystallinity, morphology, solubility, aggregation tendency, homogeneity of dispersions, and turbidity. All of these properties need to be assessed in order to determine their contribution to toxicity. Due to the lack of appropriate methods to determine the physicochemical nature of nanoparticles in biological systems, the exact nature of NM toxicity is not fully described or understood at this time. This Review emphasizes the need for state-of-the-art physicochemical characterization, the determination of appropriate exposure protocols and reliable methods for assessing NM internalization and their kinetics in living organisms. Once these issues are addressed, optimal experimental conditions could be established in order to identify if NM pose a threat to human health. Multidisciplinary research between materials scientists and life scientists should overcome these limitations in identifying the true hazards of NM.