A magnetic nanoparticle conjugate was developed that can potentially serve both as a contrast enhancement agent in magnetic resonance imaging and as a drug carrier in controlled drug delivery, targeted at cancer diagnostics and therapeutics. The conjugate is made of iron oxide nanoparticles covalently bound with methotrexate (MTX), a chemotherapeutic drug that can target many cancer cells whose surfaces are overexpressed by folate receptors. The nanoparticles were first surface-modified with (3-aminopropyl)-trimethoxysilane to form a self-assembled monolayer and subsequently conjugated with MTX through amidation between the carboxylic acid end groups on MTX and the amine groups on the particle surface. Drug release experiments demonstrated that MTX was cleaved from the nanoparticles under low pH conditions mimicking the intracellular conditions in the lysosome. Cellular viability studies in human breast cancer cells (MCF-7) and human cervical cancer cells (HeLa) further demonstrated the effectiveness of such chemical cleavage of MTX inside the target cells through the action of intracellular enzymes. The intracellular trafficking model proposed was supported through nanoparticle uptake studies which demonstrated that cells expressing the human folate receptor internalized a higher level of nanoparticles than negative control cells.