This paper has aimed to bring out the state-of-the-art information about nanocellulose, its application in papermaking process, effect on paper properties and challenges. In papermaking process, nanocellulose is used as bionanofiller and bionanocoating material. The main objective of considering nanocellulose as a bionanofiller is to retain the strength properties after using inorganic filler, such as, GCC (ground calcium carbonate) and PCC (precipitate calcium carbonate); nanocellulose also helps to increase the filler content in paper sheet without loss of paper strength. That’s why, the application of nanocellulose as filler and coating material can solve the issues of using inorganic filler in papermaking industry. Though the production of nanocellulose needs higher energy, which increases the production cost in papermaking process, it can be minimized using different advanced technologies, such as, chemical and enzymatic pretreatment. Additionally, the incorporation of nanocellulose in recycled and virgin fiber increases some physical and strength properties of the paper. Furthermore, the increment of filler content in paper sheet due to incorporating nanocellulose can also reduce the amount of fiber in papermaking process, and it reduces the cost of fiber, which can mitigate the drawback of paper production cost because of adding nanocellulose partially. Therefore, nanocellulose has the potential to use for making value added paper and paper products to compensate the production cost.