A novel nanosensor was explored for the highly selective detection of intracellular carbon monoxide (CO) by surface enhanced Raman spectroscopy (SERS) on the basis of palladacycle carbonylation. By assembling new synthesized palladacycles (PC) on the surface of gold nanoparticles (AuNPs), SERS nanosensors (AuNP/PC) were prepared with good SERS activity and reactivity with CO. When the AuNP/PC nanosensors were incubated with a CO-containing system, carbonylation of the PC assembled on AuNPs was initiated, and the corresponding SERS spectra of AuNP/PC changed significantly, which allowed the carbonylation reaction to be directly observed in situ. Upon SERS observation of CO-dependent carbonylation, this SERS nanosensor was used for the detection of CO under physiological conditions. Moreover, benefiting from the specificity of the reaction coupled with the fingerprinting feature of SERS, the developed nanosensor demonstrated high selectivity over other biologically relevant species. In vivo studies further indicated that CO in normal human liver cells and HeLa cells at concentrations as low as 0.5 μM were successfully detected with the proposed SERS strategy, demonstrating its great promise for the analytical requirements in studies of physiopathological events involved with CO.