Here, we describe the synthesis of peptide- and/or protein-functionalized Fe(2)O(3) core-Au shell (Fe(2)O(3)@Au) nanoparticles for imaging and targeting of living cells. When functionalized with the transmembrane peptide RRRRRRRR (R(8)), the Fe(2)O(3)@Au nanoparticles (R(8)-Fe(2)O(3)@Au) are able to serve as cellular trafficking agents with excellent biocompatibility. The internalization mechanism and delivery efficiency of the R(8)-Fe(2)O(3)@Au nanoparticles have been characterized with dark-field microscopy and fluorescence confocal scanning laser microcopy. Experimental result suggests that the R(8)-Fe(2)O(3)@Au nanoparticles are internalized initially by binding with the membrane-associated proteoglycans on cell surfaces, especially heparan sulfate proteoglycans (HSPGs), following an energy-dependent endocytosis process to enter into living cells. After conjugation with the epidermal growth factor receptor antibody (anti-EGFR), these nanoparticles can also be used for the recognition of cell membrane antigens to specifically label tumor cells.