Nanofluids are stable mixtures of nanoscale particles dispersed in base fluids with good prospects in enhanced oil recovery in the petroleum industry. In this review, the mechanisms and evaluation methods of stable nanofluids were analyzed. The effects of nanoparticles on viscosity, electrical conductivity, and surface/interfacial tension of base fluids were discussed. The results of laboratory research and field tests revealed that nanofluids could improve the oil recovery through plugging and profile control, transformation of wettability of rock surface, changes in oil-water interface properties, and increases in the viscosity ratio between fluids. On the other hand, nanoparticles might stabilize oil-water emulsions produced during the extraction stage, adversely affecting subsequent oil-water separation processes, especially the electrical dehydration. However, careful analysis suggested lack of in-depth studies regarding the impacts of nanoparticles on droplet coalescence inside electro-dehydration plants. The present analyses will hopefully assist future investigations in nanofluidics.