High operating temperatures significantly impede the efficiency of photovoltaic (PV) cells. This review paper comprehensively examines the potential of nanofluids as a novel approach to mitigate this challenge and boost the PV systems performance. We elucidate the fundamental principles governing nanofluid behavior and their thermophysical properties that contribute to higher heat transfer compared to conventional coolants. Subsequently, the integration of nanofluids within photovoltaic thermal systems is explored, with a detailed analysis of their impact on both electrical power generation and thermal output. Recent advancements in nanofluid research for PV cooling are critically reviewed, highlighting the documented improvements in total energy and exergy efficiencies. Additionally, we address the inherent challenges associated with nanofluid implementation, including stability, cost-effectiveness, and potential environmental considerations. Finally, the review offers valuable insights into future research directions and explores potential breakthroughs in nanofluid technology for optimized PV cooling and a consequential increase in overall PV system efficiency.