Self-assembled core/shell nanoparticles (NPs) were synthesized from water-soluble alginate substituted by hydrophobic phytosterols. Folate, a cancer-cell-specific ligand, was conjugated to the phytosterol-alginate (PA) NPs for targeting folate-receptor-overexpressing cancer cells. The physicochemical properties of folate-phytosterol-alginate (FPA) NPs were characterized by nuclear magnetic resonance, transmission electron microscopy, dynamic light scattering, electrophoretic light scattering, and fluorescence spectroscopy. Doxorubicin (DOX), an anticancer drug, was entrapped inside prepared NPs by dialysis method. The identification of prepared FPA NPs to folate-receptor-overexpressing cancer cells (KB cells) was confirmed by cytotoxicity and folate competition assays. Compared to the pure DOX and DOX/PA NPs, the DOX/FPA NPs had lower IC50 value to KB cells because of folate-receptor-mediated endocytosis process and the cytotoxicity of DOX/FPA NPs to KB cells could be competitively inhibited by free folate. The cellular uptake and internalization of pure DOX and DOX/FPA NPs was confirmed by confocal laser scanning microscopy image and the higher intracellular uptake of drug for DOX/FPA NPs over pure DOX was observed. The FPA NPs had the potential as a promising carrier to target drugs to cancer cells overexpressing folate receptors and avoid cytotoxicity to normal tissues.