Most conventional cancer therapeutics gain limited access to many types of tumors while having considerable adverse effects, resulting in low therapeutic efficacy and high toxicity. Therefore, research has now focused on the development of novel drug delivery systems (DDS) with the goal of maintaining high therapeutic drug levels at malignant cells and as low as possible drug levels in other cells. The introduction of nanotechnology has addressed some of these problems and opened up new avenues for improved cancer therapy. The design of nanoparticles for DDS takes into consideration issues such as targeting, controlled drug release and enhanced penetration via biological barriers. In this review we describe the design principles of targeted DDS for cancer therapy and the types of nanoparticles that are under development. Emphasis is put on lipid-based nanoparticles, particularly bolaamphiphilic vesicles that have tremendous potential in delivering therapeutic and diagnostic agents to specific cells following systemic administration.