Nanotechnology involves the production, manipulation and use of materials (nanoparticles) usually in the size range of 1 to 100 nm. Silver nanoparticles offer unusual optical, electronic, and chemical properties due to their ability to effectively interact with photons by virtue of the surface plasmon resonance. Owing to this property, silver nanoparticles are potentially attractive as building blocks for the development of photonic and surface plasmon devices. Silver nanoparticles also exhibit bioactivity and antibacterial properties, which make them attractive for medical and agricultural applications. Moreover the development of nanoparticles for the delivery of therapeutic agents has introduced new opportunities for the improvement of medical treatment. Despite having excellent physical and chemical bulk properties, nanoparticles do not posses suitable surface properties for specific applications like Biomolecular imaging, drug delivery etc. The surface chemistry of the nanoparticles plays a critical role in retaining the biological function of the biomolecules conjugated to nanoparticles. Currently available synthetic methodologies, however, are not satisfactory at providing the appropriate surface chemical properties like water-solubility, biocompatibility and biostability of nanoparticles. There arises the need for surface modification or Biofunctionalization of the nanoparticle where in we attach suitable organic groups to the nanoparticles. It is a process that also stabilizes the nanoparticles against agglomeration and enables their self-organization. Recent efforts have focused on developing targeted nanoparticles, which are formulated by (for therapeutic delivery) functionalizing nanoparticle surfaces with targeting molecules, such as antibodies, peptides, small molecules and oligonucleotides. Phospholipids derivatives containing disulfide groups were used to modify silver nanoparticle surfaces. The surface modified silver nanoparticles have proved to have improved biocompatibility and intracellular uptake for drug delivery. The biomolecules conjugated with nanoparticles have received the most attention in the field of clinical diagnosis and drug delivery because of their high stability, good biocompatibility and high affinity for biomolecule. © 2010 Nova Science Publishers, Inc. All rights reserved.