The objective of this study was to synthesize and characterize a thermally responsive polymer-metal nanocomposite system comprised of a solid gold nanoparticle core and thermally responsive interpenetrating polymer network (IPN) shell, which was surface functionalized or PEGylated with a covalently bound linear poly(ethylene glycol) chain layer. Gold nanoparticles (50 nm diameter) were prepared using standard gold chloride and citrate reduction method. These particles were then encapsulated inside of a polyacrylamide (PAAm)/poly(acrylic acid) (PAA) IPN shell via an in situ inverse emulsion polymerization. The surface of the nanocomposite system was then PEGylated via covalent grafting of a linear methoxy-PEG-N-hydroxysuccinimide (M.W. 3400) to the primary amine groups of the PAAm network. Scanning and transmission electron microscopy were used to confirm the successful synthesis and encapsulation of gold nanoparticles within the IPN shell. Dynamic light scattering was used to examine the temperature swelling response of the IPN particles. Zeta-potential analysis was used to confirm the successful PEGylation of the final nanocomposite system.