In this study, chitosan functionalized LaF3:Yb,Er upconverting nanotransducers (UCNTs) with controlled size and shape have been successfully synthesized by a facile one pot precipitation method. The chitosan encapsulated UCNTs show bright upconversion fluorescence upon excitation with 974 nm NIR region. The average crystallite size of UCNTs about 7.6 nm was achieved using chitosan mediated synthesis. The FTIR result confirms the chitosan coating over the LaF3:Yb,Er nanoparticles. Due to the surface modification using natural biopolymer chitosan, the as-prepared nanocrystals show excellent biocompatibility even at high dose at 200 μg/ml. To the best of our knowledge the presented work is the first report on in vitro analysis of chitosan conjugated LaF3:Yb,Er upconverting nanocrystals in human breast (MCF-7) cancer cells. These nanotransducers can be used as luminescent probes for bioimaging and deep tissue cancer therapeutic applications.