Exosomes, nanoscale extracellular vesicles (30-150 nm), play a critical role in intercellular communication by transporting bioactive molecules, including proteins, lipids, and nucleic acids. These vesicles have emerged as a transformative tool for drug delivery in brain diseases, particularly due to their ability to cross the blood-brain barrier (BBB), a major challenge in treating central nervous system (CNS) disorders. Recent studies have highlighted the potential of exosome-based therapies in treating neurodegenerative diseases such as Alzheimer’s and Parkinson’s, neuroinflammatory conditions, and brain tumors like glioblastoma. Exosomes can be engineered to enhance their targeting precision by modifying their surface to selectively deliver therapeutic agents to specific brain cells, including neurons, glial cells, and endothelial cells. This review explores the latest advancements in optimizing exosome-mediated drug delivery, focusing on surface modifications and other strategies to improve targeting efficiency and therapeutic outcomes. Additionally, exosomes are being investigated as diagnostic biomarkers for early disease detection and monitoring, offering a non-invasive alternative to traditional methods. Despite their promise, challenges such as large-scale production, cargo loading, safety concerns, and regulatory barriers remain. This review provides an overview of the current state of exosome-based therapies, critically evaluates the ongoing challenges, and explores future directions for optimizing their use in brain disease treatment, emphasizing enhancing targeted delivery and therapeutic efficacy.