Nowadays gold nanoparticle (GNP) is increasingly being used in drug delivery and diagnostics. Here we have reported a comparative analysis of detailed stability and toxicity (in vitro and in vivo) profile of three water soluble spherical GNPs, having nearly similar size, but the surfaces of which were modified with three different capping materials aspartic acid (GNPA), trisodium citrate dihydrate (GNPC) or bovine serum albumin (GNPB). Spectral analyses on the stability of these GNPs revealed that depending on the nature of capping agents, GNPs behave differently at different environmental modalities like wide range of pH, high salt concentrations, or in solutions and buffers of biological usage. GNPB was found to be extremely stable, where capped protein molecule successfully maintained its secondary structure and helicity on the nanoparticle, whereas colloidal stability of GNPA was most susceptible to altered conditions. In vitro cytotoxicity of these nanoparticle formulations in vitro were determined by water soluble tetrazolium and lactate dehydrogenase assay in human fibroblast cell line (MRC-5) and acute oral toxicity was performed in murine model system. All the GNPs were non-toxic to MRC-5 cells. GNPC had slight hepatotoxic and nephrotoxic responses. Hepatotoxicity was also evident for GNPA treatment. Present study established that there is a correlation between capping material and stability together with toxicity of nanoparticles. GNPB was found to be most biocompatible among the three GNPs tested.