Nanoparticles have been investigated as drug delivery vehicles, contrast agents, and multifunctional devices for patient care. Current nanoparticle-based therapeutic strategies for cancer treatment are mainly based on delivery of chemotherapeutic agents to induce apoptosis or DNA/siRNA to regulate oncogene expression. Here, a nanoparticle system that demonstrates an alternative approach to the treatment of cancers through the inhibition of cell invasion, while serving as a magnetic resonance and optical imaging contrast agent, is presented. The nanoparticle comprises an iron oxide nanoparticle core conjugated with an amine-functionalized poly(ethylene glycol) silane and a small peptide, chlorotoxin (CTX), which enables the tumor cell-specific binding of the nanoparticle. It is shown that the nanoparticle exhibits substantially enhanced cellular uptake and an invasion inhibition rate of ∼98% compared to unbound CTX (∼45%). Significantly, the investigation from flow cytometry analysis, transmission electron microscopy, and fluorescent imaging reveals that the CTX-enabled nanoparticles deactivated the membrane-bound matrix metalloproteinase 2 (MMP-2) and induced increased internalization of lipid rafts that contain surface-expressed MMP-2 and volume-regulating ion channels through receptor-mediated endocytosis, leading to enhanced prohibitory effects. Since upregulation and activity of MMP-2 have been observed in tumors of neuroectodermal origin, and in cancers of the breast, colon, skin, lung, prostate, ovaries, and a host of others, this nanoparticle system can be potentially used for non-invasive diagnosis and treatment of a variety of cancer types.