Water alternating gas (WAG) has gained the attraction of the oil industry because of its successful implementation in enhancing oil recovery from mature fields. This technique fundamentally reduces the problems of viscous fingering and unfavorable mobility. However, in carbonate reservoirs having an oil-wet nature, the implementation of this technique becomes inappropriate including the problems related to high gas production and early gas breakthrough. To deal with such problems, a novel oil recovery technique called nanofluid water alternating gas (NWAG) is proposed in which the nanoparticles are added into the water phase during the WAG process. The purpose of this review paper is to evaluate the efficiency of a new NWAG technique in recovering the residual oil. It further highlights the problems that are associated with the WAG process and that can be overcome by new NWAG process. In this study, the basic understanding of WAG, enhanced oil recovery (EOR) by nanoparticles, and NWAG techniques are discussed at first. Later, published experimental and simulation works are presented, and then a detailed comparative analysis between WAG and NWAG techniques, in terms of oil recovery, is done to evaluate the efficiency of both the processes. This paper also discusses the oil recovery mechanisms of NWAG. Based on the analysis of literature, it is determined that the addition of nanoparticles to the water phase during the WAG (NWAG) process results in a better oil recovery factor as compared to the WAG process. Moreover, NWAG could be a new potential EOR method and a possible solution to recovering more amount of residual oil and dealing with WAG problems like high and early water and gas cut.