Polymer-coated nanoparticles are widely used for drug delivery in cancer therapy. However, it is not clear whether the polymer coating is disrupted in the lipid bilayer or intracellular space. Our current work suggests that the polymer coating of inorganic nanoparticles is disrupted after internalization by cancer cells. Single dispersed red quantum dots (QDs) labeled with 5-carboxyfluorescein (5-FAM) (green) (diameter = 28 nm) were incubated with cancer cells (PC-3) and imaged via fluorescence microscopy. Initially the 5-FAM-labeled polymer coating was attached to the QD and its green fluorescence was quenched when the nanoparticles were internalized after 4 h incubation, but the 5-FAM-labeled polymer became separated from the QD once inside the lysosomes of cells and its fluorescence becomes visible after 8 h. The fluorescence ratio (5-FAM/QDs) was increased 29-fold after 8 h incubation compared to 2 h. The fluorescence quenching effect of PEG-5-FAM after conjugation in solution (quenched by 44%) was compared to free poly(ethylene glycol)–5-FAM (PEG-5-FAM) mixing with QDs, which only exhibited slight (6.9%) quenching of 5-FAM. In addition, the intracellular dissociation of polymer coating from QD loaded micelles (diameter = 300 nm) was also observed. Furthermore, amphiphilic polymer labeled with the hydrophobic dye 6-((4, 4-difluoro-1, 3-dimethyl-5-(4-methoxyphenyl)-4-bora-3a, 4a-diaza-s-indacene-2-propionyl)amino)hexanoic acid (BODIPY^® TMR) (red) was applied to encapsulate hydrophobic iron oxide nanoparticles (IONPs). The BODIPY dye was quenched by both the encapsulated IONPs and the hydrophobic region inside the micelles, while an 8-fold fluorescence enhancement was observed after polymeric micelle dissociation. Our in vitro results also reveal the polymeric dissociation after internalization by cancer cells as the dye signal becomes detectable after 24 h incubation. These results suggest that the polymer coating is stable in the lipid bilayer and becomes dissociated from nanoparticles in the lysosome of cancer cells. These data will provide guidance for intracellular drug delivery using polymer coated nanoparticles.