Gold nanoparticles (AuNPs) with their unique sizes, shapes, and properties have generated much enthusiasm over the last two decades, and have been explored for many potential applications. The successful application of AuNPs depends critically on the ability to modify and functionalize their surface to provide stability, compatibility, and special chemical functionality. This dissertation is aimed at exploring the chemical synthesis and surface modification of AuNPs with the effort to (1) control the number of functional groups on the particle surface, and to (2) increase the colloidal stability at the physiological conditions. To control the functionality on the particle surface, a solid phase place exchange reaction strategy was developed to synthesize the 2 nm AuNPs with a single carboxylic acid group attached on the particle surface. Such monofunctional AuNPs can be treated and used as molecular nanobuilding blocks to form more complex nanomaterials with controllable structures. A "necklace"-like AuNP/polymer assembly was obtained by conjugating covalently the monofunctional AuNPs with polylysine template, and exhibited an enhanced optical limiting property due to strong electromagnetic interaction between the nanoparticles in close proximity. To improve the colloidal stability in the psychological condition, biocompatible polymers, polyacrylic acid (PAA), and polyethylene glycol (PEG) were used to surface modify the 30 nm citrate-stabilized AuNPs. These polymer-modified AuNPs are able to disperse individually in the high ionic strength solution, and offer as the promising optical probes for bioassay applications. The Prostate specific antigen (PSA) and target DNA can be detected in the low pM range by taking advantages of the large scattering cross section of AuNPs and the high sensitivity of dynamic light scattering (DLS) measurement. In addition to the large scattering cross section, AuNPs can absorb strongly the photon energy at the surface plasmon resonance wavelength and then transform efficiently to the heat energy. The efficient photon-thermal energy conversion property of AuNPs has been used to thermal ablate the Aβ peptide aggregates under laser irradiation toward Alzheimer's disease therapy.