Over the last few decades, industrialization and urbanization have accelerated environmental degradation and, therefore, require scientific approaches for proper monitoring and management. This review specifically examines biosensors based on nanomaterials and their application in environmental monitoring for sustainable purposes such as detecting heavy metals in water, air-borne pollutants and greenhouse gases, pesticides in soil and foods, identification of biological agents and pathogens. For instance, graphene based immunosensors have shown high level of resistivity and stability, identifying lead ions in water at very low limits of detection, 0.01 ppb. In the same way, biosensors, which contain gold nanoparticles, have shown high sensitivity to the mercury ions; their detection limit reaches 0.005 ppb. This review describes the nanomaterials used in biosensors in terms of their dimensionality and the essential properties of mechanical, thermal, electronic, optical, and catalytic that qualify them for use in biosensors. It also presents the mechanisms of interaction between nanomaterials and biomolecules based on the intended application, and other important factors that need to be considered when designing nanobiomaterials. Furthermore, the review highlights the current issues, limitations, and future prospects of the material in terms of stability, reproducibility, biocompatibility, and environmental concerns, as well as the integration of the material into future smart multi-functional systems such as Internet of Things (IoT), machine learning (ML), and other innovative systems, and issues related to scaling up and commercialization. This systematic literature review shows the potential role of nanomaterial biosensors to enhance the achievement of the sustainable development goals (SDGs) toward a healthier and sustainable society.