Recent advances in nanotechnology have increased the development and production of many new nanomaterials with unique characteristics for industrial and biomedical uses. The size of these new nanoparticles (<100 nm) with their high surface area and unusual surface chemistry and reactivity poses unique problems for biological cells and the environment. This paper reviews the current research on the reactivity and interactions of carbon nanoparticles with biological cells in vivo and in vitro, with ultrastructural images demonstrating evidence of human cell cytotoxicity to carbon nanoparticles characteristic of lipid membrane peroxidation, gene down regulation of adhesive proteins, and increased cell death (necrosis, apoptosis), as well as images of nontoxic carbon nanoparticle interactions with human cells. Although it is imperative that nanomaterials be systematically tested for their biocompatibility and safety for industrial and biomedical use, there are now ways to develop and redesign these materials to be less cytotoxic, and even benign to cell systems. With this new opportunity to utilize the unique properties of nanoparticles for research, industry and medicine, there is a responsibility to test and optimize these new nanomaterials early during the development process, to eliminate or ameliorate identified toxic characteristics.