Autophagy is a cellular self-clearance process for maintaining regular cytoplasmic function, and modulation of autophagy can influence cytotoxicity, apoptosis, and clearance of toxic amyloid fibril. In a recent work, functional nanoparticles are used to modulate autophagy. However, the role of nanoparticle uptake mechanisms and their intracellular processing on autophagy is vaguely understood. Here, we show that autophagy is influenced by nanoparticle surface chemistry-directed intracellular trafficking and localization. In particular, we have designed iron oxide nanoparticles functionalized with arginine/arginine methyl ester/octyl/oleyl/cholesterol with a high cell uptake property. We found that autophagy is induced by octyl/oleyl functionalization without appreciable cell death. Further study shows that enhanced cytosolic delivery over membrane localization and increased intracellular aggregation over homogeneous cytosolic distribution lead to autophagy induction via intracellular reactive oxygen species generation. The observed result can be used to design functional nanoparticles/nanodrugs for modulating cellular autophagy that can be used in various biomedical applications.