Monodisperse, spherical, polyethylene glycol (PEG)-coated silica nanoparticles have been prepared in the size range of 50-350 nm, and their size and size distribution were characterized by SEM and multi-angle static light scattering experiments. The chemical binding of PEG to the silica nanoparticles was confirmed by infrared spectroscopy. The biocompatibility of these PEGylated nanoparticles was also studied by non-specific protein binding tests and in-vivo toxicology studies in live animals. These silica nanoparticles, as a matrix for encapsulation of certain reagents, have been used for the fabrication of intracellular sensors and have potential for applications to in vivo diagnosis, analysis and measurements, due to their small physical size and their biocompatibility, both stemming from the specialized PEG coating.