A stochastic population balance model for the formation of nanoparticles, involving mixing of two micellized aqueous solutions containing the individual reactants, respectively, has been developed to study the effects of various parameters that influence the formation process of nanoparticles. Population balance equations have been formulated assuming a cooperative mode of intermicellar exchange in an attempt to explore the largest possible particles that can form in a given system. The proposed model essentially divides the entire population of micelles into different categories and formulates the equations describing the rate of change of the probabilities of different states of the micelles in each category. The effect of parameters, such as nucleation rate, intermicellar exchange rate, critical nucleation number, and concentration of the reactants on the particle sizes that can be obtained, has been investigated. The model predictions show a reasonable qualitative agreement with experimental data. (C) 2004 American Institute of Chemical Engineers.