Autoimmune diseases are driven by dysregulated cytokine networks, where excessive cytokines such as TNF-α, IL-6, IL-17, and IL-23 promote chronic inflammation and tissue damage. While monoclonal antibodies effectively neutralise these cytokines, they face limitations including high production costs, glycosylation requirements, limited tissue penetration, and immunogenicity. Nanobodies; small, single-domain antibodies derived from camelids, offer a promising alternative due to their high stability, solubility, microbial expression, and low immunogenicity. This review examines the structural and functional advantages of nanobodies in cytokine neutralisation, with targets including TNF-α, IL-6, IL-17 A, chemokines (e.g., CXCL10), VEGF, and intracellular proteins like STAT3. Advances in artificial intelligence (AI) and machine learning (ML) for nanobody discovery, from de novo library design to affinity optimization, are highlighted. We also discuss Chemistry, Manufacturing, and Controls (CMC), regulatory pathways (FDA/EMA), and innovative delivery strategies such as oral and nanoparticle systems. Furthermore, the advantages and limitations of nanobody-based cytokine neutralisation are critically evaluated. Lastly, we review the current status of clinical trials and future directions to enhance efficacy and safety of nanobody-based therapies in autoimmune diseases.