Despite the improvement in sensing technologies, detection of small and highly reactive molecules like formaldehyde remains a highly challenging area of research. Applications of nanomaterials/nanostructures and their composites have increased as effective sensing platforms (e.g., reaction time, sensitivity, and selectivity) for the detection of aqueous or gaseous formaldehyde based on diverse sensing principles. In this review, the basic aspects of important nanomaterial-based sensing systems (e.g., electrochemical, electrical, biological, and mass variation sensors) were evaluated in relation to performance, cost, and practicality of sensing gas phase formaldehyde. Accordingly, existing knowledge gaps in such applications were assessed in various respects along with suitable recommendations for building a new roadmap for the expansion of chemical sensing technology of gas phase formaldehyde.