Purpose The aim of this study was to prepare fluconazole (FLC) nanoparticles coated with polyethylene glycol (PEG) in the form of FLC-PEG-NPs and optimize the size and entrapment efficiency. Methods Nine formulae were prepared by solvent antisolvent precipitation technique according to full 3 2 factorial designs. The effects of PEG molecular weight (X 1 ) and the drug polymer ratio (X 2 ) on the particle size (Y 1 ) and entrapment efficiency (Y 2 ) were explored. The prepared FLC-PEG-NPs were investigated for particle size, count rate, PDI, zeta potential, and morphology. Carbopol hydrogel was prepared, loaded with optimized FLC-PEG-NPs, and characterized for pH, FLC content, viscosity, homogeneity and spreadability, in vitro release, skin permeation, and antifungal activity. Results The formulated nanoparticles were uniform in size and spherical in shape with slightly rough surface and free from aggregations. The effect of PEG molecular was antagonistic on the particle size and was agonistic on EE %. The release of drug from hydrogel containing pure FLC was always lower than that from hydrogel containing FLC-PEG-NPs. The kinetic analysis of drug release obeys first-order release model and super case II transport mechanism. The cumulative amount of drug permeated applying hydrogel containing optimized FLC-PEG-NPs was significantly higher than the amount permeated using pure fluconazole containing hydrogel. The antifungal activity of hydrogel containing FLC in the form of optimized PEG-coated nanoparticles was better than hydrogel containing pure drug as indicated by relatively high inhibition zone using agar well-diffusion method. Conclusion Small spherical FLC nanoparticles with enhanced in vitro drug release as well as improved antifungal activity could be achieved by using PEG-coated fluconazole nanoparticles.