In physiological systems, nanoparticles (NPs) disguised within cell membranes constitute unique biomimetic platforms which can imitate several membrane functionalities of the source cells from where they are isolated. Cell membrane cloaked NPs have been investigated in studies encompassing a diverse array of membranes originating from cancer cells, immune cells, red blood cells and macrophages. Cancer cell membrane-cloaked NCs (CM NCs), that have the ability to transport therapeutics / diagnostics right within the tumour cells, are receiving increased attention. CM NCs combine bioactive cell surface adhesion components with additional proteins to provide longer systemic circulation and cell-specific homing, resulting in increased intra-tumoral invasion and tumor-specific NC localization. As a consequence, these CM NCs are indeed being explored for a variety of applications, as well as in cancer theranostics. The crucial processes and difficulties involving the fabrication and characterization of CM NCs have been described in this review. The homologous binding mechanism of CM NCs investigated for effective tumour targeting, have been highlighted and the merits and drawbacks of existing pre-clinical applications of CM NCs for cancer theranostics are discussed.