Controlled synthesis of nanoscalar and nanostructured materials enables the development of novel functional materials with fine-tuned optical, mechanical, electronic, magnetic, conductive and catalytic properties that are of use in numerous applications. These materials have also found their potential use in medicine as vehicles for drug delivery, in diagnostics or in combinations thereof. In principle, nanoparticles can be divided into two broad categories, organic and inorganic nanoparticles. For both types of nanoparticles there are numerous possible synthetic routes. Considering the large difference in nature of these materials and the elementary reactions involved in the synthetic routes, most manufacturing techniques are complex and only suitable for one type of particle. Interestingly, radiation chemistry, i.e., the use of ionizing radiation from radioisotopes and accelerators to induce nanomaterials or chemical changes in materials, has proven to be a versatile tool for controlled manufacturing of both organic and inorganic nanoparticles. The advantages of using radiation chemistry for this purpose are many, such as low energy consumption, minimal use of potentially harmful chemicals and simple production schemes. For medical applications one more advantage is that the material can be sterile as manufactured. Radiation-induced synthesis can be carried out in aqueous systems, which minimizes the use of organic solvents and the need for separation and purification of the final product. The radiation chemistry of water is well known, as are the various ways of fine-tuning the reactivity of the system towards a desired target by adding different solutes. This, in combination with the controllable and adjustable irradiation process parameters, makes the technique superior to most other chemical methods. In this review, we discuss the fundamentals of radiation chemistry and radiation-induced synthesis of nanoparticles in aqueous solutions. The impact of dose and dose rate as well as of controlled addition of various solutes on the final particle composition, size and size distribution are described in detail and discussed in terms of reaction mechanism and kinetics.