Quantum dots (QDs)—especially those containing cadmium—are toxic to human cells, and therefore cannot be used directly for diagnosis and treatment of human disease. To circumvent this limitation, the surface of QDs must be modified to increase their water solubility and biocompatibility. To this end, we encapsulated CdSe/ZnS QDs coupled with iron oxide nanoparticles in phospholipid micelles ranging in size from 117 to 265 nm. The QD micelles showed no cytotoxicity in A549 and HeLa cells even at higher concentrations (25 μg ml⁻¹). The ability of micelles to transport human serum albumin (HSA) protein was investigated by optical spectroscopy, and the thermodynamic parameters of the protein complexed with micelles were calculated with the van't Hoff equation at various temperatures (25–45 °C). We found that binding between micelles and HSA was stabilized by hydrogen bonds as well as electrostatic and hydrophobic forces. Fourier transform infrared spectroscopy and circular dichroism revealed changes in the secondary structure of HSA due to increment of alpha helical content, although the tertiary structure was largely preserved. The absolute quantum yield of water-soluble micelles was around 4% at an excitation wavelength 590 nm, while that of cadmium selenide (CdSe)/zinc sulfide (ZnS) QDs in chloroform was 20%. The fluorescence signal in HeLa and A549 cells remained high after 72 h of incubation with the micelles, as determined by confocal microscopy; moreover, the fluorescence signal was detected in both mother and daughter cells. These results demonstrate that CdSe/ZnS micelles are biocompatible since they do not induce cytotoxicity during long-term imaging nor affect the native structure of conjugated proteins.