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In response to the ongoing SARS-CoV-2 pandemic, the quest for coronavirus inhibitors has inspired research on a variety of small proteins beyond conventional antibodies, including robust single-domain antibody fragments, ‘nanobodies’. Here, we explore the potential of nanobody engineering in the development of antivirals and diagnostic tools. Through fusion of nanobody domains that target distinct binding sites, we engineered multimodular nanobody constructs that neutralize wild-type SARS-CoV-2 and the Alpha and Delta variants with high potency, with IC50 values up to 50 pM. However, we observed a limitation in the efficacy of multimodular nanobodies against the Beta (B.1.351) and Omicron variants (B.1.1.529), underlining the importance of accounting for viral evolution in the design of biologics. To further explore the applications of nanobody engineering in outbreak management, we present a novel detection assay, based on fusions of nanobodies with fragments of NanoLuc luciferase that can detect sub-nanomolar quantities of the SARS-CoV-2 spike protein in a single step. Our work showcases the potential of nanobody engineering to combat emerging infectious disease.