In recent years, photoluminescent gold nanoclusters have attracted considerable interest in both fundamental biomedical research and practical applications. Due to their ultrasmall size, unique molecule-like optical properties, and facile synthesis gold nanoclusters have been considered very promising photoluminescent agents for biosensing, bioimaging, and targeted therapy. Yet, interaction of such ultra-small nanoclusters with cells and other biological objects remains poorly understood. Therefore, the assessment of the biocompatibility and potential toxicity of gold nanoclusters is of major importance before their clinical application. In this study, the cellular uptake, cytotoxicity, and intracellular generation of reactive oxygen species (ROS) of bovine serum albumin-encapsulated (BSA-Au NCs) and 2-(N-morpholino) ethanesulfonic acid (MES)-capped photoluminescent gold nanoclusters (Au-MES NCs) were investigated. The results showed that BSA-Au NCs accumulate in cells in a similar manner as BSA alone, indicating an endocytotic uptake mechanism while ultrasmall Au-MES NCs were distributed homogeneously throughout the whole cell volume including cell nucleus. The cytotoxicity of BSA-Au NCs was negligible, demonstrating good biocompatibility of such BSA-protected Au NCs. In contrast, possibly due to ultrasmall size and thin coating layer, Au-MES NCs exhibited exposure time-dependent high cytotoxicity and higher reactivity which led to highly increased generation of reactive oxygen species. The results demonstrate the importance of the coating layer to biocompatibility and toxicity of ultrasmall photoluminescent gold nanoclusters.