Theranostic carriers are widely studied as they can be exploited for both imaging and drug delivery. However, although there are reports suggesting their in vitro level imaging and drug release, there is necessity to display the application (drug delivery/bioimaging/toxicity) at an in vivo level, which is a pre‐requisite for clinical use. Herein, we demonstrate targeted in vivo imaging and biodistribution in Swiss Albino mice solid tumor model using PEGylated polymer capsules encapsulating LaVO4 : Tb3+ nanoparticles (concentration of nanoparticles ∼3.4 μM LaVO4/kg body weight). The capsules were further loaded with doxorubicin for drug delivery which shows tumor regression at different time intervals in tumor mice model. We have further investigated the tumor marker enzymes including β‐glucuronidase, myeloperoxidase, lactate dehydrogenase, and alkaline phosphatase which clearly suggest the reversion to near normal levels after treating with doxorubicin‐loaded polymer capsules for 30 days. comet assay shows DNA damage in tumor cells induced by doxorubicin. Histology studies performed in tumor tissue and liver show obliteration of tumor cells after treating with doxorubicin‐loaded PEGylated polymer capsules encapsulating LaVO4 : Tb3+ nanoparticles. It has also been observed that the weight of the spleen which was enlarged in solid‐tumor‐bearing mice is significantly lower in animals treated with drug‐loaded capsules.