Magnetic nanoparticles such as Cobalt nanoclusters exhibit superparamagnetic and ferromagnetic behaviors controlled by the particle size and interaction. Superparamagnetic nanoparticles have widespread biomedical applications such as drug delivery, hyperthermia and magnetic resonance imaging (MRI). The high surface area to volume ratio of nanoparticles results in oxidation in the air. Ferromagnetic nanoparticles with their antiferromagnetic oxidized shell (e.g. Co/CoO) have shown an exchange bias effect. Although this effect is useful for magnetic recording and Spintronics application, it prevents superparamagnetism. Hence for biomedical application, Co nanoparticles are coated with Gold (Au) shell to prevent surface oxidation. Therefore accurate theoretical understanding of Au-Co nanoparticle interaction would be helpful for improving their biomedical application. In this thesis, absorption of one Au atom on Co nanoclusters is investigated in the framework of density functional theory (DFT) calculations by using the all electron full potential code FHI-aims (Fritz Haber institute ab initio molecular simulations). FHI-aims employs atom-centered numerical orbitals basis set that is both computationally efficient and accurate. First, we report the calculated structural, electronic and magnetic properties of bulk Co.. Comparing the obtained Co dimer results within five different exchange correlation functionals (such as PW-LDA, BLYP, RPBE, PBE and PBEsol), we observed better performance of BLYP functional for Co nanoclusters, hence rest of calculations were carried out with this functional. Stable geometries, binding and dissociation energies, ionization potentials, electron affinities, HOMO-LUMO gaps, magnetic properties, vibrational frequencies and infrared absorption spectrums of Co n and Co n-1 Au (n ? 6) nanoclusters are calculated in the scalar relativistic collinear magnetic level. The stable structures of Co nanoclusters mainly are obtained to be three dimensional. It is explained that the Jahn-Teller effect plays an important role in the stable structure of cobalt nanoclusters. Magnetic moments of Co atoms are aligned ferromagnetically and are enhanced with respect to the bulk value. It is observed that the magnetic moments are more sensitive to the average coordination number relative to the average bond length. Absorption of one Au atom decreases magnetization because of deduction of symmetry and average coordination number of nanoclusters. Considering electronic, chemical and dynamical stability, magic number of Co nanoclusters is concluded to be six and somewhat four, while the most stable Co n-1 Au nanoclusters was found to be Co 3 Au. We showed that the GW correction significantly improves the ionization potentials, electron affinities and HOMO-LUMO gaps toward experimental values.