The interaction between semiconductor nanocrystals (quantum dots) and biological structures and cells is strongly influenced by nanoparticle size, exposure to light, and surface cap or conjugate. Hydrophobic particles can insert into lipid bilayers, often resulting in membrane leakage. Oxidizing and reducing agents can photosensitize the quantum dot, yielding greater potential for cell damage; however, penetration into cells is seen only if the particle is specifically targeted to a receptor or antigen on the cell. When particles interact with DNA, oxidation can occur as measured by the presence of hydroxyguanine, preventing cellular replication. In this paper, several cell-free and whole-cell systems are presented to investigate the mechanisms for nanoparticle entry across lipid bilayers, the evolution of their surface composition with light and oxygen exposure, and their potential as targeted cytotoxic drugs and/or environmental hazards. Uptake into mammalian cells, Gram positive and Gram negative bacteria were compared and contrasted in order to identify important factors in nanoparticle uptake and toxicity. Simultaneously, Fourier transform infrared spectroscopy (FTIR) and time-correlated single photon counting (TCSPC) were used to track quantum dot surface degradation with time. Finally, a lipid bilayer system was used to investigate nanoparticle-membrane interactions. The advantages of this system are that its composition is fully known, so that the role of cell-surface receptors is eliminated, and recordings may be performed in the dark. These studies allowed for the formulation of preliminary models of quantum dot binding and entry that consider novel variables.