Purpose: The objective of this study is to develop indocyanine green (ICG)-loaded biodegradable nanoparticles by using biodegradable polymer, poly(dl-lactic-co-glycolic acid) (PLGA). Method: PLGA nanoparticles entrapping ICG were prepared by a modified spontaneous emulsification solvent diffusion method. To optimize the nanoparticle formulation, the influence of formulation parameters such as types of ICG, amount of ICG and the polymer were investigated. The ICG entrapment in nanoparticles, nanoparticle size and zeta potential were determined. The surface characterization was performed by atomic force microscopy (AFM) and the release of ICG from nanoparticles was determined. Results: All PLGA nanoparticle formulations were found to have the mean diameter within the range of 300–410 nm with polydispersity index (PI) within the range of 0.01–0.06. Indocyanine green showed more efficient entrapment as compared to indocyanine green sodium iodide salt. All indocyanine green-loaded nanoparticle formulations were found to have almost similar ICG content of nanoparticles and showed increase in ICG entrapment with increase in the amount of polymer. The ICG entrapment reached 74% when ICG: PLGA weight ratio in the formulation reached 1:800. AFM images indicated that the nanoparticles were almost spherical in shape and had numerous pores on their surfaces. The release pattern consisted of two phases, with initial exponential phase releasing about 78% of ICG (within 8 h) followed by a slow phase releasing about 2% of ICG (within next 16 h). Conclusions: ICG-loaded PLGA nanoparticles were prepared and the formulation was optimized. The increase in amount of polymer in formulation leads to higher ICG entrapment. Nanoparticles formed were spherical and had porous surfaces and exhibited the characteristic release pattern of a monolithic matrix based system.