The unfavorable physicochemical properties of biomass pyrolysis bio-oil make it unsuitable for use in energy/chemical infrastructure. Various physical/thermochemical methods should be employed to enhance bio-oil quality to the desired level. Thermochemical techniques (catalytic cracking, hydrodeoxygenation, and steam reforming) can effectively enhance bio-oil quality by eliminating its heteroatoms. Conventional catalysts frequently used in thermochemical upgrading suffer from several drawbacks, i.e., rapid deactivation, coke formation, and clogging/sintering. Nanotechnology has the potential to effectively tackle these challenges by enabling the production of highly efficient catalysts that offer extended durability. Hence, this article provides a detailed overview and evaluative examination of the application of nanocatalysts in bio-oil upgrading. A systematic literature review is conducted to identify the most pertinent studies on utilizing nanocatalysts in bio-oil upgrading. An effort is also made to understand the mechanisms of the action of nanocatalysts during bio-oil upgrading. Numerical analyses are conducted on the influences of important operating parameters on nanocatalyst-assisted bio-oil upgrading. Nanocatalysts have been shown to provide a higher yield than bulk catalysts, with a yield of 61.2% vs. 43.8% in the bio-oil hydrotreating process. Catalytic cracking has also been demonstrated to yield higher hydrocarbons at temperatures ranging from 380 to 420 °C, reaction times of 15–30 min, and catalyst loading of 4.5–6.5 wt%. The merits and limitations of different reactors employed in bio-oil upgrading are summarized. The strengths and limitations of nanomaterials in bio-oil upgrading are discussed, and future research directions are outlined. Overall, nanocatalysts have a long way to precede being realized in the real environment.