Poor availability in deep-seated solid tumors is a significant challenge that limits the effectiveness of currently used anticancer drugs. Approaches that can specifically enhance drug delivery to the tumor tissue can potentially improve therapeutic efficacy. In our current studies, we used nano-engineered mesenchymal stem cells (nano-engineered MSCs) as tumor-targeted therapeutic carriers. In addition to their exquisite tumor homing capabilities, MSCs overexpress efflux transporters such as P-glycoprotein and are highly drug resistant. The inherent tumor-tropic and drug-resistant properties make MSCs ideal carriers for toxic payload. Nano-engineered MSCs were prepared by treating human MSCs with drug-loaded polymeric nanoparticles. Incorporating nanoparticles in MSCs did not affect their viability, differentiation or migration potential. Nano-engineered MSCs induced dose-dependent cytotoxicity in A549 lung adenocarcinoma cells and MA148 ovarian cancer cells in vitro. An orthotopic A549 lung tumor model was used to monitor the in vivo distribution of nanoengineered MSCs. Intravenous injection of nanoparticles resulted in non-specific biodistribution, with significant accumulation in the liver and spleen while nano-engineered MSCs demonstrated selective accumulation and retention in lung tumors. These studies demonstrate the feasibility of developing nano-engineered MSCs loaded with high concentration of anticancer agents without affecting their tumor-targeting or drug resistance properties.