A novel chitosan-based multifunctional nanoparticle (PY-CS-PLA) using cationic polylysine (PL) polymer and L-cysteine has been developed and investigated for the oral delivery of paclitaxel (PTX). As amphiphilic polymer, PY-CS-PLA presented good capability in self-assembling into spherical nanoparticle with mean size of 165 nm, and encapsulating PTX into the hydrophobic core. The encapsulated PTX was observed to be sustainedly released from the functionalized chitosan nanoparticle, and with a positive correlation to the pH value of the medium in the range of 1.2 to 7.4. The in vitro studies indicated that PY-CS-PLA/PTX could effectively enhance the cellular uptake of the PTX in Caco-2 cells. Pharmacokinetic result indicated that the oral bioavailability of PY-CS-PLA/PTX in rats was determined to be 5.63-fold to that of Taxol. Moreover, PY-CS-PLA/PTX improved the distribution of PTX in tumor site and presented better antitumor efficacy in Heps tumor-bearing mice and with less toxicity than other formulations. In conclusion, the PY-CS-PLA/PTX nanoparticle might be developed as a promising delivery vehicle for improving the oral bioavailability and therapeutic effect of hydrophobic antitumor drugs.