Pediatric dental anxiety significantly compromises treatment cooperation and oral health outcomes, necessitating effective behavior management strategies in clinical practice. Nitrous oxide–oxygen inhalation sedation remains one of the most widely used pharmacological approaches in pediatric dentistry due to its rapid onset, titratability, anxiolytic and analgesic properties, and favorable safety profile. This review synthesizes current evidence regarding the scientific basis, clinical indications, contraindications, effectiveness, and safety considerations of nitrous oxide sedation in children. Available data support its role in improving patient cooperation, facilitating minimally to moderately invasive procedures, and reducing the need for general anesthesia in appropriately selected cases. Although adverse effects are generally mild and transient, appropriate patient selection, adherence to monitoring protocols, and compliance with established guidelines are essential to ensure safe practice. The review also discusses occupational and environmental considerations, current clinical limitations, and variability in patient response. Emerging adjunctive technologies, including virtual reality–based distraction, artificial intelligence–assisted monitoring, and advanced delivery systems, are highlighted as complementary strategies to enhance patient experience and procedural efficiency. Furthermore, the potential application of nanomedicine-based drug delivery systems is explored as a future direction for improving sedation precision and minimizing systemic exposure, although regulatory and long-term safety challenges remain. Integrating established sedation protocols with technological and nanomedical innovations may contribute to more individualized, effective, and safer management of pediatric dental anxiety.