PEGylation, an extensively used surface modification method for nanoparticles (NPs), continues to hold promise for optimizing therapy for various medical conditions by achieving efficient and selective delivery of multiple therapeutics and nanocarriers. Rheumatoid arthritis is a chronic autoimmune and inflammatory disease treated mainly by disease-modifying antirheumatic drugs (DMARDs) (e.g., leflunomide); however, these drugs suffer from systemic exposure and adverse effects. Leflunomide (LEF) was loaded into PEGylated (PEG)-lecithin chitosan nanoparticles (LCNPs) to enhance its therapeutic efficacy and safety profile. LEF-PEG-LCNPs showed a particle size of 115.31 ±3.24 nm, a zeta potential of 31.3±1.8 mV, an entrapment efficiency of 89.63 ±2.25 %, and an improved release profile than non-pegylated LCNPs and LEF-pure. Fourier transform-infrared (FTIR) spectroscopy, differential scanning calorimetry (DSC), and transmission electron microscopy (TEM) were also performed. The effects of orally administrated LEF-pure, LEF-marketed, LEF-LCNPs and LEF-PEG-LCNPs against Complete Freund’s Adjuvant (CFA)-induced rheumatoid arthritis (RA) in rats were investigated. LEF-PEG-LCNPs showed more significant inhibition of paw edema (72.74%), rheumatoid factor RF (40.76%), TNF-α (55.6%), IL-6 (47.42%), ALT (80.59%), and AST (39.83%) as compared to positive control. Furthermore, histopathological studies showed a nearly normal appearance of bone trabecular tissue, liver, kidney, lung, and heart. This highlights LEF-PEG-LCNPs as an exceptional anti-rheumatoid arthritis therapy compared to pure and marketed formulations.