Neurodegenerative diseases (NDDs), including Alzheimer's disease (AD) and Parkinson's disease (PD), affect the ageing population worldwide and while severely impairing the quality of life of millions, they also cause a massive economic burden to countries with progressively ageing populations. Parallel with the search for biomarkers for early detection and prediction, the pursuit for therapeutic approaches has become growingly intensive in recent years. Various prospective therapeutic approaches have been explored with an emphasis on early prevention and protection, including, but not limited to, gene therapy, stem cell therapy, immunotherapy and radiotherapy. Many pharmacological interventions have proved to be promising novel avenues, but successful applications are often hampered by the poor delivery of the therapeutics across the blood-brain-barrier (BBB). To overcome this challenge, nanoparticle (NP)-mediated drug delivery has been considered as a promising option, as NP-based drug delivery systems can be functionalized to target specific cell surface receptors and to achieve controlled and long-term release of therapeutics to the target tissue. The usefulness of NPs for loading and delivering of drugs has been extensively studied in the context of NDDs, and their biological efficacy has been demonstrated in numerous preclinical animal models. Efforts have also been made towards the development of NPs which can be used for targeting the BBB and various cell types in the brain. The main focus of this review is to briefly discuss the advantages of functionalized NPs as promising theranostic agents for the diagnosis and therapy of NDDs. We also summarize the results of diverse studies that specifically investigated the usage of different NPs for the treatment of NDDs, with a specific emphasis on AD and PD, and the associated pathophysiological changes. Finally, we offer perspectives on the existing challenges of using NPs as theranostic agents and possible futuristic approaches to improve them.