Two-dimensional nanomaterials are emerging as promising candidates for a wide range of biomedical applications including tissue engineering, biosensing, pathogen incapacitation, wound healing, and gene and drug delivery. Graphene, due to its high surface area, photothermal property, high loading capacity, and efficient cellular uptake, is at the forefront of these materials and plays a key role in this multidisciplinary research field. Poor water dispersibility and low functionality of graphene, however, hamper its hybridization into new nanostructures for future nanomedicine. Functionalization of graphene, either by covalent or non-covalent methods, is the most useful strategy to improve its dispersion in water and functionality as well as processability into new materials and devices. In this review, recent advances in functionalization of graphene derivatives by different (macro)molecules for future biomedical applications are reported and explained. In particular, hydrophilic functionalization of graphene and graphene oxide (GO) to improve their water dispersibility and physicochemical properties is discussed. We have focused on the anticancer drug delivery of polyfunctional graphene sheets.