A multifunctional biocompatible nanovector based on magnetic nanoparticle and carboxymethyl cellulose (CMC) was developed. The nanoparticles have been characterized using TEM, SEM, DLS, FT-IR spectra, VSM, and TGA studies. We found that the synthesized carboxymethyl cellulose magnetic nanoparticles (CMC MNPs) were spherical in shape with an average size of 150 nm having low aggregation and superparamagnetic properties. We found that the folate-tagged CMC MNPs were delivered to cancer cells by a folate-receptor-mediated endocytosis mechanism. 5-FU was encapsulated as a model drug for delivering cytotoxicity, and we could demonstrate the sustained release of 5-FU. It was also observed that the FITC-labeled CMC MNPs could effectively enter cells, and the fate of nanoparticles was tracked with Lysotracker. The CMC MNPs could induce significant cell death when an alternating magnetic field was applied. These results indicate that the multifunctional CMC MNPs possess a high drug loading efficiency and high biocompatibility and with low cell cytotoxicity and can be considered to be promising candidates for CMC-based targeted drug delivery, cellular imaging, and magnetic hypertherrnia (MHT).