The objective of this review is to summarize recent advances in chitosan nanoparticles prepared by ionotropic gelation. Significant progress has occurred in this area since the method was first reported. The gelation technique has been improved through a number of creative methodological modifications. Ionotropic gelation via electrospraying and spinning disc processing produces nanoparticles with a more uniform size distribution. Large-scale manufacturing of the nanoparticles can be achieved with the latter approach. Hydrophobic and hydrophilic drugs can be simultaneously encapsulated with high efficiency by emulsification followed by ionic gelation. The turbulent mixing approach facilitates nanoparticle formation at a relatively high polymer concentration (5 mg/mL). The technique can be easily tuned to achieve the desired polymer/surface modifications (e.g., blending, coating, and surface conjugation). Using factorial-design-based approaches, optimal conditions for nanoparticle formation can be determined with a minimum number of experiments. New insights have been gained into the mechanism of chitosan-tripolyphosphate nanoparticle formation. Chitosan nanoparticles prepared by ionotropic gelation tend to aggregate/agglomerate in unfavorable environments. Factors influencing this phenomenon and strategies that can be adopted to minimize the instability are discussed. Ionically cross-linked nanoparticles based on native chitosan and modified chitosan have shown excellent efficacy for controlled and targeted drug-delivery applications.