Laser interstitial thermal therapy (LITT) guided by magnetic resonance imaging (MRI) is a new treatment option for patients with brain and non-central nervous system (non-CNS) tumors. MRI guidance allows for precise placement of optical fiber in the tumor, while MR thermometry provides real-time monitoring and assessment of thermal doses during the procedure. Despite promising clinical results, LITT complications relating to brain tumor procedures, such as hemorrhage, edema, seizures, and thermal injury to nearby healthy tissues, remain a significant concern. To address these complications, nanoparticles offer unique prospects for precise interstitial hyperthermia applications that increase heat transport within the tumor while reducing thermal impacts on neighboring healthy tissues. Furthermore, nanoparticles permit the co-delivery of therapeutic compounds that not only synergize with LITT, but can also improve overall effectiveness and safety. In addition, efficient heat-generating nanoparticles with unique optical properties can enhance LITT treatments through improved real-time imaging and thermal sensing. This review will focus on (1) types of inorganic and organic nanoparticles for LITT; (2) in vitro, in silico, and ex vivo studies that investigate nanoparticles' effect on light–tissue interactions; and (3) the role of nanoparticle formulations in advancing clinically relevant image-guided technologies for LITT.