Drug delivery systems with active targeting ligand provide improved therapeutic efficiency due to the selectivity towards tumor cells. In this paper we prepared drug loaded nanoparticles (NPs) using folate (FA) incorporated chitosan (FA-CS) based on ionic gelation technology. FA-CS NPs were spherical in shape with an average particle size of 100 nm, while 5-fluorouracil (5-FU) loaded NPs became less circular with average particle size of 100-500 nm. NPs made from FA-CS conjugates exhibited improved capability to encapsulate hydrophilic 5-FU. It was found 5-FU distributed in FA-CS NPs in solid solution state. In vitro release results demonstrated the release of 5-FU from FA-CS NPs was more controllable as compared to that of CS NPs.