An effective, simple and practically useful method to incorporate fluorescent nanoparticles inside live biological cells was developed. The internalization time and concentration dependence of a frequently used liposomal transfection factor (Lipofectamine 2000) was studied. A user friendly, one-step technique to obtain water and organic solvent soluble Er(3+) and Yb(3+) doped NaYF4 nanoparticles coated with polyvinylpyrrolidone was obtained. Structural analysis of the nanoparticles confirmed the formation of nanocrystals of the desired sizes and spectral properties. The internalization of NaYF4 nanoparticles in HeLa cervical cancer cells was determined at different nanoparticle concentrations and for incubation periods from 3 to 24 h. The images revealed a redistribution of nanoparticles inside the cell, which increases with incubation time and concentration levels, and depends on the presence of the transfection factor. The study identifies, for the first time, factors responsible for an effective endocytosis of the up-converting nanoparticles to HeLa cells. Thus, the method could be applied to investigate a wide range of future 'smart' theranostic agents. Nanoparticles incorporated into the liposomes appear to be very promising fluorescent probes for imaging real-time cellular dynamics.