Worldwide research activity at the nanoscale is triggering the appearance of new, and frequently surprising, materials properties in which the increasing importance of surface and interface effects plays a fundamental role. This opens further possibilities in the development of new multifunctional materials with tuned physical properties that do not arise together at the bulk scale. Unfortunately, the standard methods currently available for solving the atomic structure of bulk crystals fail for nanomaterials due to nanoscale effects (very small crystallite sizes, large surface-to-volume ratio, near-surface relaxation, local lattice distortions etc.). As a consequence, a critical reexamination of the available local-structure characterization methods is needed. This work discusses the real possibilities and limits of X-ray absorption spectroscopy (XAS) analysis at the nanoscale. To this end, the present state of the art for the interpretation of extended X-ray absorption fine structure (EXAFS) is described, including an advanced approach based on the use of classical molecular dynamics and its application to nickel oxide nanoparticles. The limits and possibilities of X-ray absorption near-edge spectroscopy (XANES) to determine several effects associated with the nanocrystalline nature of materials are discussed in connection with the development of ZnO-based dilute magnetic semiconductors (DMSs) and iron oxide nanoparticles.