Development of folate (FA)-functionalized gold nanoparticles (AuNPs) has greatly increased in recent years due to their potential in cancer treatment. As surface functionalization of polymer-free AuNPs with thiol groups could result in agglomeration and precipitation, AuNPs should be stabilized with an efficient polymer. In this study, citric acid-PEG branched polymer (CPEG) acted as a reducing as well as stabilizing agent in the synthesis of AuNPs. The thiol group of thioglycolic acid (TGA) attached to CPEG-stabilized AuNPs and interacted with the free carboxylic acid group on the surface of TGA-AuNP nanoconjugates. Stable TGA-AuNP nanoconjugates were obtained only with CPEG-stabilized AuNPs and not with citrate-stabilized AuNPs. The carboxylic acid group on the surface of AuNPs was used to attach FA via an EDC/NHS coupling reaction to obtain FA-TGA-AuNP nanoconjugates. In vitro cytotoxicity studies indicated that FA-TGA-AuNPs were not toxic to normal cells up to a concentration of 200 μg/mL. However, FA-TGA-AuNP nanoconjugates effectively inhibited proliferation of MCF-7 cancer cells at a low concentration of 25 μg/mL after 3 days of incubation. The anticancer activity of FA-TGA-AuNPs was enhanced by incorporating the anticancer drug 5-fluorouracil into the nanoconjugates, which exhibited sustained drug release up to 5 days. Hence, the developed biocompatible FA-TGA-AuNPs could be used for specific killing of breast cancer cells.