As nanotechnology has become a major industry, risks of nanomaterials (NMs) in the environment are a growing concern. In addition to the potential environmental risk of NMs, long term sustainability of the nanotechnology industry, with its immense potential societal benefits, is, in part, dependent on the development of an appropriate risk framework. The current consensus is that an understanding of the physico-chemical behaviour of NMs is paramount in the assessment of ecotoxicological impacts and likely mechanisms of biological effects. This understanding will, for instance, allow accurate quantification of exposure, dose and the establishment of a relationship between ecotoxicological testing in the laboratory and effects in natural systems. This critical review is a summation of a Workshop held at the University of Birmingham (November 2007), attended by the authors with a view to address these questions. This paper attempts to understand our current knowledge of the links between physico-chemical characterisation and ecotoxicology in aquatic and terrestrial systems. Recommendations in priority order are the development of analytical methodologies to quantify NM concentration and characteristics in natural systems and the need for an improved understanding of NM fate and behaviour. Finally, there is a need for systematic experiments under realistic conditions which examine and link both suitable ecotoxicological endpoints and physico-chemical characteristics.