Spray drying plays a crucial role in the processing of pharmaceutical products such as pills, capsules, and tablets as it is used to convert drug-containing liquids into dried powdered forms. Nano spray drying is in particular used to improve drug formulation by encapsulating active ingredients in polymeric wall materials for protection and delivering the drugs to the right place and time in the body. The nano spray dryer developed in the recent years extends the spectrum of produced powder particles to the submicron- and nanoscale with very narrow size distributions and sample quantities in the milligram scale at high product yields. This enables the economical use of expensive active pharmaceutical ingredients and pure drugs. The present paper explains the concept of nano spray drying in the laboratory-scale and discusses the influence of the main process parameters on the final powder properties like particle size, morphology, encapsulation efficiency, and drug loading. Application results of nano spray drying for the formulation and encapsulation of different drugs are reviewed.