There has been growing interest in developing colloidal metal and semiconductor nanocrystals as biomedical imaging contrast agents and therapeutics, since light excitation can cause the nanocrystals to fluoresce or heat up. Recent advances in synthetic chemistry produced fluorescent 2-4 nm diameter silicon and 1-2 nm diaemeter CuInSSe nanocrystals, as well as 16 nm diameter copper selenide (Cu₂₋[subscript x]Se) nanocrystals exhibiting strong absorbance of near infrared light suitable for biomedical applications. However, the syntheses yield nanocrystals that are stabilized by an adsorbed layer of hydrocarbons, making the nanocrystals hydrophobic and non-dispersible in aqueous solution. Encapsulating these nanocrystals in amphiphilic polymer micelles enables the nanocrystals to disperse in water. Subsequently, the Si nanocrystals were injected into tissue to demonstrate fluorescence imaging, the photothermal transduction efficiency of copper selenide nanocrystals was characterized in water, and the copper selenide nanocrystals were used enhance the photothermal destruction of cancer cells in vitro. The polymer-encapsulated copper selenide nanocrystals were found to have higher photothermal transduction efficiency than 140 nm diameter Au nanoshells, which have been widely investigated for photothermal therapy. Combining the optical properties of metal and semiconductor nanocrystals with the drug-carrying capability of lipid vesicles has received attention lately since it may create a nanomaterial capable of performing simultaneous drug delivery, optical contrast enhancement, and photo-induced therapy. Hydrophobic, dodecanethiol-coated Au nanocrystals were dispersed in water with phosphatidylcholine lipids and characterized using cryo transmission electron microscopy. 1.8 nm diameter Au nanocrystals completely load the bilayer of unsaturated lipid vesicles when the vesicles contain residual chloroform, and without chloroform the nanocrystals do not incorporate into the vesicle bilayer. 1.8 nm Au nanocrystals dispersed in water with saturated lipids to form lipid-coated nanocrystal agglomerates, which sometimes adhered to vesicles, and the shape of the agglomerates varied from linear nanocrystal chains, to flat sheets, to spherical clusters as the lipid fatty acid length was increased from 12 to 18 carbons. Including squalene formed lipid-stabilized emulsion droplets which were fully loaded with the Au nanocrystals. Results with 4.1 nm Au and 2-3 nm diameter Si nanocrystals were similar, but these nanocrystals could not completely load the bilayers of unsaturated lipids. / text