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Nanosponges are a novel class of hyper-crosslinked polymer based colloidal structures consisting of solid nanoparticles with colloidal sizes and nanosized cavities. These nano-sized colloidal carriers have been recently developed and proposed for drug delivery, since their use can solubilize poorly water-soluble drugs and provide prolonged release as well as improve a drug's bioavailability by modifying the pharmacokinetic parameters of actives. Development of nanosponges as drug delivery systems, with special reference to cyclodextrin based nanosponges, is presented in this article. In the current review, attempts have been made to illustrate the features of cyclodextrin based nanosponges and their applications in pharmaceutical formulations. Special emphasis has been placed on discussing the methods of preparation, characterization techniques and applications of these novel drug delivery carriers for therapeutic purposes. Nanosponges can be referred to as solid porous particles having a capacity to load drugs and other actives into their nanocavity; they can be formulated as oral, parenteral, topical or inhalation dosage forms. Nanosponges offer high drug loading compared to other nanocarriers and are thus suitable for solving issues related to stability, solubility and delayed release of actives. Controlled release of the loaded actives and solubility enhancement of poorly water-soluble drugs are major advantages of nanosponge drug delivery systems.