Embelin, identified primarily from the Embelia ribes plant, has been shown to be a natural small molecule inhibitor of X-linked inhibitor of apoptosis protein (XIAP). It is also a potent inhibitor of NF-κB activation, which makes it a potentially effective suppressor of tumor cell survival, proliferation, invasion, angiogenesis, and inflammation. However, embelin itself is insoluble in water, which makes it unsuitable for in vivo applications. In this work, we developed a novel micelle system through conjugating embelin to a hydrophilic polymer, poly(ethylene glycol) 3500 (PEG(3.5K)) through an aspartic acid bridge. The PEG(3.5k)-embelin(2) (PEG(3.5k)-EB(2)) conjugate readily forms micelles in aqueous solutions with a CMC of 0.0205 mg/mL. Furthermore, PEG(3.5k)-EB(2) micelles effectively solubilize paclitaxel (PTX), a model hydrophobic drug used in this study. Both drug-free and drug-loaded micelles were small in size (20-30 nm) with low polydispersity indexes. In vitro cytotoxicity studies with several tumor cell lines showed that PEG(3.5k)-EB(2) is comparable to embelin in antitumor activity and synergizes with PTX at much lower doses. Our results suggest that PEG-derivatized embelin may represent a novel and dual-functional carrier to facilitate the in vivo applications of poorly water-soluble anticancer drugs such as PTX.