The design of nanoparticles is critical for their efficient use in many applications ranging from biomedicine to sensing and energy. While shape and size are responsible for the properties of the inorganic nanoparticle core, the choice of ligands is of utmost importance for the colloidal stability and function of the nanoparticles. Moreover, the selection of ligands employed in nanoparticle synthesis can determine their final size and shape. Ligands added after nanoparticle synthesis infer both new properties as well as provide enhanced colloidal stability. In this article, we provide a comprehensive review on the role of the ligands with respect to the nanoparticle morphology, stability, and function. We analyze the interaction of nanoparticle surface and ligands with different chemical groups, the types of bonding, the final dispersibility of ligand-coated nanoparticles in complex media, their reactivity, and their performance in biomedicine, photodetectors, photovoltaic devices, light-emitting devices, sensors, memory devices, thermoelectric applications, and catalysis.