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Despite extensive research into the biomedical and pharmaceutical applications of nanoparticles, and the liver being the main detoxifying organ in the human body, there are limited studies which delineate the hepatotoxicity of nanoparticles. This paper reports on the biological interactions between liver cells and chitosan nanoparticles, which have been widely recognised as biocompatible. Using the MTT assay, human liver cells were shown to tolerate up to 4 h of exposure to 0.5% w/v of chitosan nanoparticles (18 ± 1 nm, 7.5 ± 1.0 mV in culture medium). At nanoparticle concentrations above 0.5% w/v, cell membrane integrity was compromised as evidenced by leakage of alanine transaminase into the extracellular milieu, and there was a dose-dependent increase in CYP3A4 enzyme activity. Uptake of chitosan nanoparticles into the cell nucleus was observed by confocal microscopic analysis after 4 h exposure with 1% w/v of chitosan nanoparticles. Electron micrographs further suggest necrotic or autophagic cell death, possibly caused by cell membrane damage and resultant enzyme leakage.