The focus of this article is based on the aqueous dispersed state properties of inorganic ZnO nanoparticles (average size ≤ 4 nm), their surface modification and bio-functionalization with folic acid at physiological pH ~ 7.5, suitable for bio-imaging and targeted therapeutic application. While TEM studies of the ZnO nano-crystallites have been performed to estimate their size and morphology in dry state, the band gap properties of the freshly prepared samples, the hydrodynamic size in aqueous solution phase and the wide fluorescence range in visible region have been investigated to establish the fact that the sol is particularly suitable for bio-medical purpose in the aqueous dispersed state.