This paper reports the synthesis and characterization of surface-enhanced Raman scattering (SERS) label-tagged gold nanostars, coated with a silica shell containing methylene blue photosensitizing drug for singlet-oxygen generation. To our knowledge, this is the first report of nanocomposites possessing a combined capability for SERS detection and singlet-oxygen generation for photodynamic therapy. The gold nanostars were tuned for maximal absorption in the near-infrared (NIR) spectral region and tagged with a NIR dye for surface-enhanced resonance Raman scattering (SERRS). Silica coating was used to encapsulate the photosensitizer methylene blue in a shell around the nanoparticles. Upon 785 nm excitation, SERS from the Raman dye is observed, while excitation at 633 nm shows fluorescence from methylene blue. Methylene-blue-encapsulated nanoparticles show a significant increase in singlet-oxygen generation as compared to nanoparticles synthesized without methylene blue. This increased singlet-oxygen generation shows a cytotoxic effect on BT549 breast cancer cells upon laser irradiation. The combination of SERS detection (diagnostic) and singlet-oxygen generation (therapeutic) into a single platform provides a potential theranostic agent.