Colloidal inorganic nanoparticles have wide applications in the detection of analytes and in biological assays. A large number of these assays rely on the ability of gold nanoparticles (AuNPs, in the 20 nm diameter size range) to undergo a color change from red to blue upon aggregation. AuNP assays can be based on cross-linking, non-cross linking or unmodified charge-based aggregation. Nucleic acid-based probes, monoclonal antibodies, and molecular-affinity agents can be attached by covalent or non-covalent means. Surface plasmon resonance and SERS techniques can be utilized. Silver NPs also have attractive optical properties (higher extinction coefficient). Combinations of AuNPs and AgNPs in nanocomposites can have additional advantages. Magnetic NPs and ZnO, TiO2 and ZnS as well as insulator NPs including SiO2 can be employed in colorimetric assays, and some can act as peroxidase mimics in catalytic applications. This review covers the synthesis and stabilization of inorganic NPs and their diverse applications in colorimetric and optical assays for analytes related to environmental contamination (metal ions and pesticides), and for early diagnosis and monitoring of diseases, using medically important biomarkers.