Here, we report a novel dispersion polymerization for the preparation of cross‐linked poly[N‐(2‐hydroxypropyl) methacrylamide] (PHPMA)‐based nanogels in water/2‐methoxyethanol mixture (H2O/MetCel), initiated with potassium persulfate (KPS), and stabilized with poly(vinyl alcohol) 25/140 (PVA) and sodium dodecyl sulfate (SDS). Obtained nanogels were characterized using transmission (TEM) and cryogenic transmission electron microscopy (cryo‐TEM), dynamic light scattering (DLS), asymmetric flow field‐flow fractionation (A4F), nuclear magnetic resonance spectroscopy (NMR), and Raman spectroscopy methods in terms of size, particle size distribution, morphology, and structure. N‐(2‐hydroxypropyl) methacrylamide (HPMA) was copolymerized with 20 wt% ethylene dimethacrylate (EDMA) resulting in 138 nm poly[N‐(2‐hydroxypropyl) methacrylamide‐co‐ethylene dimethacrylate] (PHPMA‐EDMA) nanogel dispersion with irregular shape and core‐shell type structure. Next, we copolymerized HPMA with 20 wt% EDMA and 10 wt% propargyl methacrylate (PMA) to incorporate reactive functionality into the final core‐shell type 120 nm poly[N‐(2‐hydroxypropyl) methacrylamide‐co‐ethylene dimethacrylate‐co‐propargyl methacrylate] (PHPMA‐EDMA‐PMA) nanogel dispersion. Then, the biocompatibility of PHPMA‐EDMA‐PMA nanogel was proved using rat mesenchymal stem cells (rMSC), and human foreskin fibroblasts (BJ). PHPMA‐EDMA‐PMA nanogel was fluorescently labeled with sulfo‐cyanine3 azide resulting in 131 nm nanogel. We performed in vitro uptake studies with fluorescently labeled PHPMA‐EDMA‐PMA nanogel using rMSC showing that the fluorescently labeled PHPMA‐EDMA‐PMA nanogel was well‐distributed in the cytosol and taken up into lysosomes.