Nanocarriers play an important role in improving the photo- and thermal-stability of photosensitizers to gain better pharmacokinetics behavior in tumor photothermal therapy. Herein, PEGylated chitosan (CG-PEG; PEG: polyethylene glycol) nanoparticles with ultrasmall size (similar to 5 nm), were prepared through a water-in-oil reverse microemulsion method using genipin as a cross-linker. Particle size and zeta-potential can be tuned by varying the molar ratio between chitosan amino groups and genipin. CG-PEG-ICG (ICG: indocyanine green) nanoparticles were fabricated by adding ICG to CG-PEG aqueous solution through a self-assembly method via electrostatic interaction. The resultant CG-PEG-ICG nanoparticles exhibited improved photo- and thermal-stability, good biocompatibility, and low toxicity. When irradiated with a laser, the cells incubated with CG-PEG-ICG nanoparticles showed very low cell viability (15%), indicating the CG-PEG-ICG nanoparticles possess high in vitro photothermal toxicity. Moreover, the CG-PEG nanocarriers can significantly alter the biodistribution and prolong the retention time of ICG in the mice body after intravenous injection. In vivo photothermal study of tumors injected with CG-PEG-ICG nanoparticles containing ICG at a concentration greater than 100 mu g.mL(-1) (100 mu L) induced irreversible tissue damage. The growth of U87 tumors was dramatically inhibited by CG-PEG-ICG nanoparticles, demonstrating that the CG-PEG nanoparticles may act as potential ICG nanocarriers for effective in vivo tumor photothermal therapy.