Hydrogel nanoparticles of cross-linked polyvinylpyrrolidone (PVP-NP) (35–50 nm in diameter) containing fluoresceinated dextran (FITC-Dx) were encapsulated in reconstituted Sendai viral envelopes containing only the fusion (F) protein (F-virosomes1). Incubation of these loaded F-virosomes with human hepatoblastoma cells (HepG2) in culture resulted in membrane-fusion-mediated delivery of NPs to the cell cytoplasm, as inferred from the ability of cells to internalize FITC-Dx loaded PVP-NP (PVPf-NP) in the presence of azide (an inhibitor of the endocytotic process). Introduction of PVPf-NP into the HepG2 cells was assured by selective accumulation of FITC fluorescence in the cytosolic compartment. The structural integrity of the internalized PVPf-NP was also confirmed by fluorescence microscopy and ultracentrifugation analysis. The potential usefulness of PVP-NP-mediated cytosolic release of water soluble drugs both in vitro and in vivo has been established for the first time.