This paper addresses an important gap regarding the systematic knowledge and evidence on how value chains can contribute to nutrition, while remaining financially viable and inclusive of smallholder farmers. It does so by reviewing the literature on linkages between value chains and nutrition from a smallholder perspective, and presenting an analytical framework for the development of nutrition-sensitive value chains. The review identified multiple interventions that can serve the goals of income generation and nutrition improvement of smallholders, while also contributing to environmental sustainability and gender empowerment. But trade-offs exist too. By applying a nutrition lens to the different stages of the value chain, challenges and opportunities across these dimensions can be identified to promote development of nutrition-sensitive value chains.