Efficient delivery of chemotherapeutic drugs to tumor tissue demands careful engineering of delivery systems which will improve drug bioavailability and targetability. Chitosan biopolymer has been widely studied as drug delivery system, specifically for delivering drugs via topical, nasal and oral routes. One of the major limitations of chitosan material is that it has limited solubility in physiological pH conditions (pH 7.4). To address this issue, our group has developed ultra-small size (~28 nm; monodispersed) water-soluble chitosan nanoparticles using water-in-oil (W/O) microemulsion system. Chitosan polymer was covalently cross-linked within the W/O microemulsion system using water-soluble bi-carboxylic cross-linkers such as tartaric acid and polyglutamic acid (PGA). These nanoparticles were successfully labeled with fluorescent and paramagnetic contrast agents for multimodal bioimaging purposes. Further studies are in progress for loading therapeutic agents in chitosan nanoparticles and evaluating therapeutic efficacy against cancer, MRSA and other intra-cellular diseases.