We encapsulated gadolinium oxide (Gd2O3) nanoparticles within phospholipid micelles as a novel low cytotoxic T1-weighted MRI imaging contrast agent (MGdNPs) that can also deliver small molecules such as DNA plasmids. MGdNPs show relatively good MRI relaxivity values, negligible cytotoxicity, excellent cellular uptake and expression of DNA plasmids in vivo. Biodistribution studies in mice show that intranasal and intraperitoneal administration of MGdNPs can effectively target specific organs.