Silk fibroin is an FDA approved biopolymer for clinical applications with great potential in nanomedicine. However, silk-based nanoformulations are still facing several challenges in processing and drug delivery efficiency (such as reproducibility and targetability), especially in cancer therapy. To address these challenges, robust and controllable production methods are required for generating nanocarriers with desired properties. This study aimed to develop a novel method for the production of peptide-functionalized magnetic silk nanoparticles with higher selectivity for cancer cells for targeted delivery of the hydrophobic anticancer agent ASC-J9. A new microfluidic device with a swirl mixer was designed to fabricate magnetic silk nanoparticles (MSNP) with desired size and narrow size distribution. The surface of MSNPs was functionalized with a cationic amphiphilic anticancer peptide, G(IIKK)I-NH (G3), to enhance their selectivity towards cancer cells. The G3-MSNPs increased the cellular uptake and anticancer activity of G3 in HCT 116 colorectal cancer cells compared to free G3. Moreover, the G3-MSNPs exhibited considerably higher cellular uptake and cytotoxicity in HCT 116 colorectal cancer cells compared to normal cells (HDFs). Encapsulating ASC-J9 in G3-MSNPs resulted in augmented anticancer activity compared to free ASC-J9 and non-functionalized ASC-J9 loaded MSNPs within its biological half-life. Hence, functionalizing MSNPs with G3 enabled targeted delivery of ASC-J9 to cancer cells and enhanced its anticancer effect. Functionalization of nanoparticles with anticancer peptides could be regarded as a new strategy for targeted delivery and enhanced efficiency of anticancer drugs. Furthermore, the microfluidic device introduced in this paper offers a robust and reproducible method for fabrication of small sized homogenous nanoparticles.