A wide variety of biological and medical analyses are based on the use of optical signals to report specific molecular events. Thanks to advances in nanotechnology, various nanostructures have been extensively used as optical reporters in bio- and chemical assays. This review describes recent progress in chemical sensing using noble metal nanoparticles (gold and silver), quantum dots and upconverting nanoparticles. It provides insights into various nanoparticle-based sensing strategies including fluorescence/luminescence resonance energy transfer nanoprobes as well as activatable probes sensitive to specific changes in the biological environment. Finally we list some research challenges to be overcome in order to accelerate the development of applications of nanoparticle bio- and chemical sensors.