We report the design and preparation of polyion complex (PIC) nanoparticles composed of anionic hydrophobically modified and cationic poly(amino acid) and the effect of hydrophobic interactions on the stability of these PIC nanoparticles under physiological conditions. We selected poly(gamma-glutamic acid) (gamma-PGA) its the biodegradable anionic polymer and poly(epsilon-lysine) (epsilon-PL) as the cationic polymer. Amphiphilic graft copolymers consisting of gamma-PGA and L-phenylalanine (L-Phe) as the hydrophobic side chain were synthesized by grafting L-Phe to gamma-PGA. The PIC nanoparticles were prepared by mixing gamma-PGA-graft-L-Phe (gamma-PGA-Phe) with epsilon-PL in phosphate buffered saline (PBS). The formation and stability of the PIC nanoparticles were investigated by dynamic light scattering (DLS) measurements. Monomodal anionic PIC nanoparticles were obtained using nonstoichiometric mixing ratios. When unmodified gamma-PGA was mixed with epsilon-PL in PBS, the formation of PIC nanoparticles was observed. However, within a few hours after the preparation, the PIC nanoparticles dissolved in the PBS. In contrast, gamma-PGA-Phe/epsilon-PL nanoparticles showed high stability for it prolonged period of time in PBS and over it wide range of pH values. The stability and size of the PIC nanoparticles depended on the gamma-PGA-Phe/epsilon-PL mixing ratio and the hydrophobicity of the gamma-PGA. The improved stability of the PIC nanoparticles was attributed to the formation of hydrophobic domains in the core of the nanoparticles. The fabrication of PIC nanoparticles using hydrophobic interactions was very useful for the stabilization of the nanoparticles. These results will provide a novel concept in the design of carrier systems composed of PIC. It is expected that the gamma-PGA-Phe/epsilon-PL nanoparticles will have great potential as multifunctional carriers for pharmaceutical and biomedical applications, such as drug and vaccine delivery systems.