Encapsulating anticancer drugs in nanoparticles has proven to be an effective mechanism to alter the pharmacokinetic and pharmacodynamic profiles of the drugs, leading to clinically useful cancer therapeutics like Doxil and DaunoXome. Underdeveloped tumor vasculature and lymphatics allow these first-generation nanoparticles to passively accumulate within the tumor, but work to create the next-generation nanoparticles that actively participate in the tumor targeting process is underway. Lipid nanoparticles functionalized with targeting peptides are among the most often studied. The goal of this article is to review the recently published literature of targeted nanoparticles to highlight successful designs that improved in vivo tumor therapy, and to discuss the current challenges of designing these nanoparticles for effective in vivo performance.