OBJECTIVES: In this study, a novel targeted MRI contrast agent was developed by coating gadolinium oxide nanoparticles (GdO NPs) with β-cyclodextrin (CD)-based polyester and targeted by folic acid (FA). MATERIALS AND METHODS: The developed GdO@PCD-FA MRI contrast agent was characterized and evaluated in relaxivity, in vitro cell targeting, cell toxicity, blood compatibility and in vivo tumor MR contrast enhancement. RESULTS: In vitro cytotoxicity and hemolysis assays revealed that GdO@PCD-FA NPs have no significant cytotoxicity after 24 and 48 h against normal human breast cell line (MCF-10A) at concentration of up to 50 µg Gd/mL and have high blood compatibility at concentration of up to 500 µg Gd/mL. In vitro MR imaging experiments showed that GdO@PCD-FA NPs enable targeted contrast T- and T-weighted MR imaging of M109 as overexpressing folate receptor cells. Besides, the in vivo analysis indicated that the maximum contrast-to-noise ratio (CNR) of tumor in mice increased after injection of GdO@PCD-FA up to 5.89 ± 1.3 within 1 h under T-weighted imaging mode and reduced to 1.45 ± 0.44 after 12 h. While CNR increased up to maximum value of 1.98 ± 0.28 after injection of GdO@PCD within 6 h and reduced to 1.12 ± 0.13 within 12 h. CONCLUSION: The results indicate the potential of GdO@PCD-FA to serve as a novel targeted nano-contrast agent in MRI.