Hydrogel nanoparticles (HNP) are an emerging tool of biomedicine with unique materials characteristics, scope, and utility. These hydrated, soft colloidal carriers can penetrate through voids with dimensions narrower than the size of the particle, provide stabilization for fragile biological cargo and allow diffusion and exchange of solutes with external phase. However, techniques to assemble HNP are few; solitary examples exist of biocompatible polymers being formulated into HNP; and knowledge on the biomedical properties of HNP remains rather cursory. In this work, we investigate assembly of HNP based on a polymer with decades of prominence in the biomedical field, poly(vinyl alcohol), PVA. We develop a novel method for production of PVA HNP through nanoprecipitation-based assembly of polymer nanoparticles and subsequent physical hydrogelation of the polymer. Polymer nanoparticles and HNP were visualized using scanning electron microscopy and fluorescence imaging, and characterized using dynamic light scattering and zeta potential measurements. Interaction of PVA HNP with mammalian cells was investigated using flow cytometry, viability screening, and measurements of nitric oxide production by cultured macrophages. The latter analyses revealed that PVA administered as a polymer solution or in the form of HNP resulted in no measurable increase in production of the inflammation marker. Unexpectedly, PVA HNP exerted a pronounced inhibition of NO synthesis by stimulated macrophages, that is, had an anti-inflammatory activity. This effect was accomplished with a negligible change in the cell viability and was not observed when PVA was administered as a polymer solution. To the best of our knowledge, this is the first observation of inhibition of NO synthesis in macrophages by administered nanoparticles and specifically hydrogel nanoparticles. Taken together, our results present PVA HNP as promising colloidal hydrogel nanocarriers for biomedical applications, specifically drug delivery and assembly of intracellular biosensors.