Nanomaterials can improve drug delivery by enhancing the solubility of poorly water-soluble drugs, protecting drugs from degradation, and targeting drugs to specific tissues or cells. For instance, liposomes can encapsulate both hydrophilic and hydrophobic drugs, allowing for controlled release and reduced toxicity. Nanoparticles can be engineered to deliver drugs to specific cells, such as cancer cells, by exploiting the enhanced permeability and retention (EPR) effect.