Nanoemulsions are colloidal dispersion drug delivery systems that are thermodynamically stable, made up of two immiscible liquids mixed along with emulsifying agents (surfactants and co-surfactants) to form a single phase. Nanoemulsions have broadly been studied as drug delivery systems. This review aims to provide detailed information regarding various formulation and characterization methods developed for nanoemulsions. Nanoemulsions are prepared using two different methods, the the Brute force method and persuasion method. Various characterization techniques for nanoemulsions include particle size, polydispersity index, zeta potential determination of entrapment efficiency, as well as characterization through differential scanning calorimetry, Fourier-transform infrared spectroscopy and transmission electron microscopy. Nanoemulsions are further evaluated by studying in vitro drug release, shelf life, dispersibility, viscosity, in vitro permeation, stability and thermodynamic stability, surface tension, friccohesity, refractive index, percent transmittance, pH and osmolarity. The high flexibility of nanoemulsion includes a variety of preparation process options and a combination of widely assorted components such as surfactants, liquid lipids or even drug-conjugates. These features provide novel approach for designing innovative nanoemulsions aiming at high-value applications. This review presents the overview of nanoemulsions with challenges and prospects of different nanoemulsion types and its application.