Abstract The nanofluid is a solid–liquid mixture in which metallic or nonmetallic nanoparticles are suspended. The suspended ultrafine particles change transport properties and heat transfer performance of the nanofluid, which exhibits a great potential in enhancing heat transfer. The mechanism of heat transfer enhancement of the nanofluid is investigated. Based on the assumption that the nanofluid behaves more like a fluid rather than a conventional solid–fluid mixture, this article proposes two different approaches for deriving heat transfer correlation of the nanofluid. The effects of transport properties of the nanofluid and thermal dispersion are included.