The development of synthetic nanomaterials that could embed within, penetrate, or induce fusion between membranes without permanent disruption would have great significance for biomedical applications. Here we describe structure-function relationships of highly water-soluble gold nanoparticles comprised of an ∼1.5-5 nm diameter metal core coated by an amphiphilic organic ligand shell, which exhibit membrane embedding and fusion activity mediated by the surface ligands. Using an environment-sensitive dye anchored within the ligand shell as a sensor of membrane embedding, we demonstrate that particles with core sizes of ∼2-3 nm are capable of embedding within and penetrating fluid bilayers. At the nanoscale, these particles also promote spontaneous fusion of liposomes or spontaneously embed within intact liposomal vesicles. These studies provide nanoparticle design and selection principles that could be used in drug delivery applications, as membrane stains, or for the creation of novel organic/inorganic nanomaterial self-assemblies.