Nanotheranostics—where nanoscale materials serve both diagnostic and therapeutic functions—are rapidly transforming gene therapy by tackling critical delivery challenges. This review explores the design and engineering of various nanoparticle systems (lipid-based, polymeric, inorganic, and hybrid) to enhance stability, targeting, and endosomal escape of genetic payloads. We discuss how real-time imaging capabilities integrated into these platforms enable precise localization and controlled release of genes, improving treatment efficacy while reducing off-target effects. Key strategies to overcome delivery barriers (such as proton sponge effect and photothermal disruption) and to achieve nuclear localization are highlighted, along with recent advances in stimuli-responsive systems that facilitate spatiotemporal control of gene expression. Clinical trials and preclinical studies demonstrate the expanding role of nanotheranostics in managing cancer, inherited disorders, and cardiovascular and neurological diseases. We further address regulatory and manufacturing hurdles that must be overcome for the widespread clinical adoption of nanoparticle-based gene therapies. By synthesizing recent progress and ongoing challenges, this review underscores the transformative potential of nanotheranostics for effective, targeted, and image-guided gene delivery.