Cyclodextrins are a type of natural materials that can be used in the pharmaceutical industry. Cyclodextrins are safe, biodegradable, with the multifunctional property as they can encapsulate both hydrophilic and hydrophobic drugs. Additionally, they can overcome challenges associated with drug toxicity and enhancing the solubility of the insoluble drugs; thus, cyclodextrins are effective carriers in loading tiny molecules. Moreover, the synthesis of nanosponges (NPs) systems can enhance the drug encapsulation in cyclodextrin cavities to control the rate of drug released. Cyclodextrin can contain the drug molecules to form a clathrate; cyclodextrin-based NPs can maintain a high loading capacity of various small molecules for drug delivery. This review presents a general overview of the current research progress and the applications of cyclodextrin-based NPs for drug delivery in the past two decades.