It is expected that the rapid expansion of nanotechnology will bring many potential benefits. However, initial investigations have demonstrated that nanomaterials may adversely affect human health and the environment. By increasing the application of nanoparticles, protection of the human respiratory system from exposure to airborne nanoparticles and ultrafine particulates has become an emerging health concern. Available research has demonstrated an association between exposure to ambient airborne particulates and ultrafine particles and various adverse heath effects including increased morbidity and mortality. Nanomaterial structures are more likely to be toxic than the same materials of conventional sized samples and can be inhaled more deeply into the lungs. While the respiratory tract is considered as the primary target organ for inhaled nanoparticles, recent research has demonstrated that extrapulmonary organs are also affected. The very small size distribution and large surface area of nanoparticles available to undergo reactions may play a significant role in nanotoxicity, yet very little is known about their interactions with biological systems. This review explores the possible underlying toxicity mechanisms of nanoparticles following inhalational exposure. Nanoparticles differ from the same conventional material at a larger scale in physical, chemical and biological characteristics; therefore it is critical to recognize the potential risk of nanoparticle exposure using appropriate toxicity test methods. Current advances and limitations of toxicity assessment methods of nanoparticles are discussed highlighting the recent improvements of in vitro screening tools for the safety evaluation of the rapidly expanding area of nanotechnology.