We report here, reverse micelle mediated synthesis of multifunctional dextran (dex) coated Gd2O3 nanoparticles (NPs) carrying rose bengal (RB) dye for magnetic resonance and optical imaging. The diameter of these RB attached dex coated Gd2O3 NPs (Gd-dex-RB NPs) was found to be ˜17 nm as measured by TEM. NMR line broadening effect on the surrounding water protons affirmed the paramagnetic nature of these NPs. Optical properties of Gd-dex-RB NPs were validated by UV-Vis and fluorescence spectroscopy. Time dependent release profile of RB from NPs at two different pH of 7.4 and 5.0 revealed that these NPs behave as slow releasing system. In-vitro study revealed that NPs are efficiently taken up by cells and show optical activity in cellular environment. In vitro cell viability (SRB) assay was performed on cancerous (A-549, U-87) and normal (HEK-293) cell lines, showed the absence of cytotoxic effect of Gd-dex-RB NPs. Therefore, such multifunctional NPs can be efficiently used for bio-imaging and optical tracking.