The purpose of these studies was to compare the cell uptake, biodistribution and tumor retention of folate-coated and PEG-coated gadolinium (Gd) nanoparticles. Gd is a potential agent for neutron capture therapy (NCT) of tumors. Gd nanoparticles were engineered from oil-in-water microemulsion templates. To obtain folate-coated nanoparticles, a folate ligand [folic acid chemically linked to distearoylphosphatidylethanolamine (DSPE) via a PEG spacer MW 3350] was included in nanoparticle preparations. Similarly, control nanoparticles were coated with DSPE-PEG-MW 3350 (PEG-coated). Nanoparticles were characterized based on size, size distribution, morphology, biocompatibility and tumor cell uptake. In vivo studies were carried out in KB (human nasopharyngeal carcinoma) tumor-bearing athymic mice. Biodistribution and tumor retention studies were carried out at pre-determined time intervals after injection of nanoparticles (10 mg/kg). Gd nanoparticles did not aggregate platelets or activate neutrophils. The retention of nanoparticles in the blood 8, 16 and 24 h post-injection was 60%, 13% and 11% of the injected dose (ID), respectively. A maximum Gd tumor localization of 33+/-7 microg Gd/g was achieved. Both folate-coated and PEG-coated nanoparticles had comparable tumor accumulation. However, the cell uptake and tumor retention of folate-coated nanoparticles was significantly enhanced over PEG-coated nanoparticles. Thus, the benefits of folate ligand coating were to facilitate tumor cell internalization and retention of Gd-nanoparticles in the tumor tissue. The engineered nanoparticles may have potential in tumor-targeted delivery of Gd thereby enhancing the therapeutic success of NCT.