In this work we describe the formulation and characterization of chemically modified polymeric nanocapsules incorporating the anticancer drug, quercetin, for the passive and active targeting to tumors. Folic acid was conjugated to poly(lactide-co-glycolide) (PLGA) polymer to facilitate active targeting to cancer cells. Two different methods for the conjugation of PLGA to folic acid were employed utilizing polyethylene glycol (PEG) as a spacer. Characterization of the conjugates was performed using FTIR and (1)H NMR studies. The PEG and folic acid content was independent of the conjugation methodology employed. PEGylation has shown to reduce the size of the nanocapsule; moreover, zeta-potential was shown to be polymer-type dependent. Comparative studies on the cytotoxicity and cellular uptake of the different formulations by HeLa cells, in the presence and absence of excess folic acid, were carried out using MTT assay and Confocal Laser Scanning Microscopy, respectively. Both results confirmed the selective uptake and cytotoxicity of the folic acid targeted nanocapsules to the folate enriched cancer cells in a folate-dependent manner. Finally, the passive tumor accumulation and the active targeting of the nanocapsules to folate-expressing cells were confirmed upon intravenous administration in HeLa or IGROV-1 tumor-bearing mice. The developed nanocapsules provide a system for targeted delivery of a range of hydrophobic anticancer drugs in vivo.