Currently gold nanoparticles are being explored for drug delivery and other biomedical applications; therefore it is necessary to study the fate of such nanoparticles inside the body. The objective of the present study was to investigate the cellular uptake and toxicity of the gold nanoparticles synthesized using a microbial polysaccharide, gellan gum, as a capping and reducing agent. The cellular uptake of gold nanoparticles was studied on mouse embryonic fibroblast cells, NIH3T3 and human glioma cell line, LN-229. The cellular uptake study indicated that the gellan gum-reduced gold nanoparticles were located in cancer cells (LN-229) while no uptake was observed in normal mouse embryonic fibroblast cells (NIH3T3). The toxicity of the gold nanoparticles was evaluated by carrying out subacute 28 day oral toxicity studies in rats. Subacute administration of gum-reduced gold nanoparticles to the rats did not show any hematological or biochemical abnormalities. The weight and normal architecture of various organs did not change compared with control. The current findings, while establishing the specific uptake of nanoparticles into cancerous cells, also demonstrates that the gellan gum-reduced gold nanoparticles are devoid of toxicity in animals following oral administration. Copyright (c) 2010 John Wiley & Sons, Ltd.