Interaction of leukocyte function associated antigen-1 (LFA-1) on T-lymphocytes and intercellular adhesion molecule-1 (ICAM-1) on epithelial cells controls leukocyte adhesion, spreading, and extravasation. This process plays an important role in leukocyte recruitment to a specific site of inflammation and has been identified as a biomarker for certain types of carcinomas. Cyclo-(1,12)-PenITDGEATDSGC (cLABL) has been shown to inhibit LFA-1 and ICAM-1 interaction via binding to ICAM-1. In addition, cLABL has been shown to internalize after binding ICAM-1. The possibility of using cLABL conjugated nanoparticles (cLABL-NP) as a targeted and controlled release drug delivery system has been investigated in this study. The cLABL peptide was conjugated to a modified Pluronic surfactant on poly (DL-lactic-co-glycolic acid) (PLGA) nanoparticles. The cLABL-NP showed more rapid cellular uptake by A549 lung epithelial cells compared to nanoparticles without peptide. The specificity of ICAM-1-mediated internalization was confirmed by blocking the uptake of cLABL-NP to ICAM-1 using free cLABL peptide to block the binding of cLABL-NP to ICAM-1 on the cell surface. Cell studies suggested that cLABL-NPs targeted encapsulated doxorubicin to ICAM-1 expressing cells. Cytotoxicity assay confirmed the activity of the drug incorporated in nanoparticles. Sustained release of doxorubicin afforded by PLGA nanoparticles may enable cLABL-NP as a targeted, controlled release drug delivery system.