Fluorescent cadmium telluride quantum dots (CdTe QDs) are an optically attractive option for bioimaging, but are known to display high cytotoxicity. Nanoparticles synthesized from chitosan, a natural biopolymer of beta 1-4 linked glucosamine, display good biocompatibility and cellular uptake. A facile, green synthetic strategy has been developed to embed green fluorescent cadmium telluride quantum dots (CdTe QDs) in biocompatible CNPs to obtain a safer preparation than `as is' QDs. High-resolution transmission electron microscopy showed the crystal lattice corresponding to CdTe QDs embedded in CNPs while thermogravimetry confirmed their polymeric composition. Electrostatic interactions between thiol-capped QDs (4nm, -57mV) and CNPs (\~300nm, +38mV) generated CdTe QDs-embedded CNPs that were stable up to three months. Further, viability of NIH3T3 mouse fibroblast cells in vitro increased in presence of QDs-embedded CNPs as compared to bare QDs. At the highest concentration (10 mu g/ml), the former shows 34 and 39% increase in viability at 24 and 48h, respectively, as compared to the latter. This shows that chitosan nanoparticles do not release the QDs up to 48h and do not cause extended toxicity. Furthermore, hydrolytic enzymes such as lysozyme and chitinase did not degrade chitosan nanoparticles. Moreover, QDs-embedded CNPs show enhanced internalization in NIH3T3 cells as compared to bare QDs. This method offers ease of synthesis and handling of stable, luminescent, biocompatible CdTe QDs-embedded CNPs with a favorable toxicity profile and better cellular uptake with potential for bioimaging and targeted detection of cellular components.