Chitosan (CS) was first modified hydrophobically with deoxycholic acid (DCA) and then with polyethylene glycol (PEG) to obtain a novel amphiphilic polymer (CS-DCA-PEG). This was covalently bound to folic acid (FA) to develop nanoparticles (CS-DCA-PEG-FA) with tumor cell targeting property. The structure of the conjugates was characterised using Fourier transform infrared and (1)H nuclear magnetic resonance spectroscopy and X-ray diffraction. Based on self-aggregation, the conjugates formed nanoparticles with a low critical aggregation concentration of 0.035 mg/ml. The anti-cancer drug doxorubicin (DOX) was encapsulated into the nanoparticles with a drug-loading capacity of 30.2 wt%. The mean diameter of the DOX-loaded nanoparticles was about 200 nm, with a narrow size distribution. Transmission electron microscopy images showed that the DOX-loaded nanoparticles were spherical. The drug release was studied under different conditions. Furthermore, the cytotoxic activities of DOX in CS-DCA-PEG-FA nanoparticles against folate receptor (FR)-positive HeLa cells and FR-negative fibroblast 3T3 cells were evaluated. These results suggested that the CS-DCA-PEG-FA nanoparticles may be a promising vehicle for the targeting anticancer drug to tumor cells.