Poly(ethylene glycol) (PEG), known for its biocompatibility and biodegradability, has been in use for surface coating of nanoparticles. PEG coating prevents opsonization, thereby enhancing the systemic circulation time of nanoparticles. It is nonfluorescent in nature requiring additional conjugation with fluorescent dye molecules for tracking the nanoparticles. In the current work, PEG was converted into fluorescent PEG (FL PEG) through a facile one-pot synthesis approach. This eliminates the need for additional fluorescent tag for tracking the nanoparticles. FL PEG showed excellent biocompatibility with normal cell lines (L929). There was a delayed uptake of FL PEG by zebrafish embryos which indicated the systemic circulation enhancement property of PEG. Fluorescent polymer encapsulated metal nanoparticles (PoeM NPs) were prepared by using FL PEG as a coating agent. The antibacterial and photothermal therapy by PoeM NPs were demonstrated. PoeM (Ag) NPs showed a significant antibacterial effect equivalent to that of gentamicin (broad spectrum antibiotic). PoeM (Au) nanoshells (NS) were prepared by galvanic replacement of PoeM (Ag) NPs. They were further used for photothermal therapy of cancer cells. They showed 67 ± 0.5% of cancer cell death when subjected to NIR laser irradiation. Thus, FL PEG based PoeM NPs could lead to the development of multifunctional nanosystems to be deployed for both imaging and therapeutic applications. Copyright © 2020 American Chemical Society.