Bio-functionalized nanoparticles with semiconducting/metallic core encapsulated in a bio- or bio-derived materials are promising for applications in biology and especially in cancer diagnostic and healing. In this report, we report a facile, single-step, first-time synthesis and in-situ functionalization strategy for the preparation of monodispersed selenium nanoparticles (SeNPs) functionalized using a novel polysaccharide (DP1) extracted from Dictyophora indusiata (a fungus). The DP1 functionalized SeNPs (DP1-SeNPs), where DP1 is attached to the surface via Se-O bond as well as physic-sorption had, an average diameter of 89 nm, and were highly uniform, extremely stable compared to bare SeNPs. Detailed investigation of the biological properties of DP1-SeNP illustrated that they exhibit unprecedented, enhanced, and selective antiproliferative activity through inducing cell apoptosis confirmed by nuclear condensation, DNA cleavage, and accumulation of S phase cell arrest. The mechanism of the induced apoptosis was found to be a combination of the activation of caspases 3, 8, and 9, the Fas-associated death domain protein (FADD), reactive oxygen species (ROS) overproduction, as well as mitochondrial dysfunction. It is envisioned that the reported DP1-SeNPs will offer a new phase space for high-efficiency anticancer treatment with little side effect.