Colloidal nanoparticle biosensors have received intense scientific attention and offer promising applications in both research and medicine. We review the state of the art in nanoparticle development, surface chemistry, and biosensing mechanisms, discussing how a range of technologies are contributing toward commercial and clinical translation. Recent examples of success include the ultrasensitive detection of cancer biomarkers in human serum and in vivo sensing of methyl mercury. We identify five key materials challenges, including the development of robust mass-scale nanoparticle synthesis methods, and five broader challenges, including the use of simulations and bioinformatics-driven experimental approaches for predictive modeling of biosensor performance. The resultant generation of nanoparticle biosensors will form the basis of high-performance analytical assays, effective multiplexed intracellular sensors, and sophisticated in vivo probes.