Effective clinical diagnosis and treatment of cancer is reliant upon the positive identification of damaged tissue before and after surgical or radiation treatment. The promise of next generation contrast agents is the sensitive and selective recognition of cancerous tissue using highly specific targeting ligands. Multimodal nanoparticles may fill this role as cell-targeted agents capable of exhibiting contrast enhancement in both magnetic resonance (MR) and optical imaging. Specifically, iron oxide nanoparticles coated with biocompatible polymers serve as both a biodegradable MR imaging agent as well as a platform for small molecule, protein and fluorophore modification. In the work presented here, iron oxide nanoparticles have been coated with either poly(ethylene glycol) (PEG) or a graft copolymer chitosan-PEG for prolonged stability, and functionalized with: (1) peptide-major histocompatibility complexes for T-cell trafficking during immunotherapy, (2) annexin V for apoptosis detection during post-therapy evaluation, or (3) biotin for fusion protein pretreatment imaging (e.g. for use in non-Hodgekin's lymphoma). Each nanoparticle system has been characterized for proper surface modification, physical profile, targeting functionality and bioactivity. Additionally, two novel nuclear magnetic resonance (NMR) techniques have been developed for sensitive iron oxide nanoparticle quantification, and direct PEG coating quantification of nanoparticles. These techniques may be applicable to multiple nanoparticle formulations using NMR systems ubiquitous in academic and professional laboratories. The development of new nanoparticle systems for a variety of clinical applications, as well as novel characterization techniques will offer new possibilities for both clinicians and researchers alike.