Chitosan nanoparticles (CNPs) were synthesized by ionic gelation method and its immunomodulatory properties were investigated in zebrafish larvae. Average particle size and zeta potential were 181.2 nm and +37.2 mv, respectively. Initially, toxicity profile was tested in zebrafish embryo at 96 h post fertilization (hpf) stage using medium molecular weight chitosan (MMW-C) and CNPs. At 5 μg/mL, the hatching rate was almost similar in both treatments, however, the survival rate was lower in MMW-C compared to CNPs exposure, suggesting that toxicity effect of CNPs in hatched larvae was minimal at 5 μg/mL compared to MMW-C. Quantitative real time PCR results showed that in CNPs exposed larvae at 5 days post fertilization (5 dpf) stage, immune related (il-1β, tnf-α, il-6, il-10, cxcl-18b, ccl34a.4, cxcl-8a, lyz-c, defβl-1, irf-1a, irf-3, MxA) and stress response (hsp-70) genes were induced. In contrast, basal or down regulated expression of antioxidant genes (gstp-1, cat, sod-1, prdx-4, txndr-1) were observed. Moreover, zebrafish larvae (at 5 dpf stage) exposed to CNPs (5 μg/mL) showed higher survival rate at 72 h post infection stage against pathogenic Aeromonas hydrophila challenge compared to controls. These results suggest that although CNPs can have toxic effects to the larvae at higher doses, CNPs exposure at 5 μg/mL could enhance the immune responses and develop the disease resistance against A. hydrophila, which could be attributed to its strong immune modulatory properties.