Multifunctional hydrogels incorporating nanocarriers are at the cutting edge of biomedical research, providing innovative solutions for targeted drug delivery and tissue engineering. Nanocarrier-loaded hydrogels can deliver multiple therapeutic agents therapeutics in a controlled and sequential manner owing to the unique properties of the polymers used for preparing these hydrogels. Hydrogels can be constructed from natural, semisynthetic, and synthetic polymers and have found use in contact lenses and wound dressings as well as in drug delivery for treating cancer, diabetes, bacterial infections, and other pathological conditions. This review discusses various types of hydrogels, their fabrication methods, and their applications in targeted drug delivery, including insights from completed and ongoing clinical trials. Furthermore, this review examines innovative diagnostic and therapeutic systems based on complex and multifunctional polymeric nanocarriers.