Gold nanoparticles (1-10 nm size range) were prepared with an appreciably narrow size distribution by in situ reduction of HAuCl4 in the presence of heterobifunctional poly(ethylene glycol) (PEG) derivatives containing both mercapto and acetal groups (alpha -acetal-omega -mercapto-PEG). The alpha -acetal-PEG layers formed on gold nanoparticles impart appreciable stability to the nanoparticles in aqueous solutions with elevated ionic strength and also in serum-containing medium. The PEG acetal terminal group was converted to aldehyde by gentle acid treatment. followed by the reaction with p-aminophenyl-beta -D-lactopyranoside (Lac) in the presence of (CH3)(2)NHBH3. Lac-conjugated gold nanoparticles exhibited selective aggregation when exposed to Recinus communis agglutinin (RCA(120)), a bivalent lectin specifically recognizing the beta -D-galactose residue, inducing significant changes in the absorption spectrum with concomitant visible color change from pinkish-red to purple. Aggregation of the Lac-functionalized gold nanoparticles by the RCA(120) lectin was reversible, recovering the original dispersed phase and color by addition of excess galactose. Further, the degree of aggregation was proportional to lectin concentration. allowing the system to be utilized to quantitate lectin concentration with nearly the same sensitivity as ELISA. This simple, yet highly effective, derivatization of gold nanoparticles with heterobifunctional PEG provides a convenient method to construct various colloidal sensor systems currently applied in bioassays and biorecognition.