Spherical or hexagonal NaYF4:Yb,Er nanoparticles (UCNPs) with sizes of 25 nm (S-UCNPs) and 120 nm (L-UCNPs) were synthesized by high-temperature coprecipitation and subsequently modified with three kinds of polymers. These included poly(ethylene glycol) (PEG) and poly(N,N-dimethylacrylamide-co-2-aminoethylacrylamide) [P(DMA-AEA)] terminated with an alendronate anchoring group, and poly(methyl vinyl ether-co-maleic acid) (PMVEMA). The internalization of nanoparticles by rat mesenchymal stem cells (rMSCs) and C6 cancer cells was visualized by electron microscopy and the cytotoxicity of the UCNPs and their leaches was measured by the real time proliferation assay. Comet assay was used to determine oxidative damage of UCNPs. In vivo study on mice determined the elimination route and potential accumulation of UCNPs in the body. The results showed that the L- and S-UCNPs were internalized into cells in the lumen of endosomes. Proliferation assay revealed that L-UCNPs were less toxic than S-UCNPs. The viability of rat mesenchymal stem cells (rMSCs) incubated with particles decreased in the order S-UCNP@Ale-(PDMA-AEA) > S-UCNP@Ale-PEG > S-UCNPs > S-UCNP@PMVEMA. Similar results were obtained in C6 cells. Oxidative damage measured by the Comet assay showed that neat L-UCNPs caused oxidative damage to rMSCs more than all coated UCNPs while no difference was observed in C6 cells. An in vivo study indicated that L-UCNPs were eliminated from the body via the hepatobiliary route; L-UCNP@Ale-PEG particles were almost eliminated from the liver 96 h after intravenous application. Pilot fluorescence imaging confirmed the limited in vivo detection capabilities of the nanoparticles.