Because of their large size compared to small molecules and their multifunctionality, nanoparticles (NPs) hold promise as biomedical imaging, diagnostic, and theragnostic agents. However, the key to their success hinges on a detailed understanding of their behavior after administration into the body. NP biodistribution, target binding, and clearance are complex functions of their physicochemical properties in serum, which include hydrodynamic diameter, solubility, stability, shape and flexibility, surface charge, composition, and formulation. Moreover, many materials used to construct NPs have real or potential toxicity or may interfere with other medical tests. In this review, we discuss the design considerations that mediate NP behavior in the body and the fundamental principles that govern clinical translation. By analyzing those nanomaterials that have already received regulatory approval, most of which are actually therapeutic agents, we attempt to predict which types of NPs hold potential as diagnostic agents for biomedical imaging. Finally, using quantum dots as an example, we provide a framework for deciding whether an NP-based agent is the best choice for a particular clinical application.