Thermo-sensitive poly(N-isopropylacrylamide-co-acrylic acid) (P(NIPAAm-co-AAc)) latex particles were prepared with and without sodium dodecyl sulfate (SDS) surfactant via an emulsion polymerization method. The P(NIPAAm-co-AAc) latex particle sizes were approximately 1.1 microm without SDS addition and the particle sizes were in the nanometer range (59 nm) with SDS at its critical micelle concentration (CMC) of 8 mM. We propose a scheme to demonstrate how the SDS concentration affects the synthesized latex particle size. The lower critical solution temperature (LCST) was hardly influenced by the SDS level but increased with the AAc concentration. The PNIPAAm-co-AAc latex particles were employed as thermo-sensitive drug carriers and 4-acetamidophenol was loaded to study the drug release rates from the nano-gels. The effective drug diffusion coefficients within the nano-gels varied as a function of particle size, AAc content, and temperature. The smaller or AAc-rich hydrogel particles provided sustainable drug release property and have potential use in biomedical applications.