Disclosed is a method of therapy used in combination with a diagnostic tool for enhanced photodynamic therapy using MRI, called (magnetic resonance imaging)-guided photodynamic therapy. The methods of the present invention includes administration of MRI contrast agent labeled polymer photosensitizer conjugates, detection and localization of tumor or cancer tissues with contrast-enhanced MRI and specific illumination and treatment of localized target tissues, such as tumors or cancer cells, using laser energy. The delivered laser energy activates the photosensitizer accumulated in the target tissue, resulting in treatment. Also disclosed are novel conjugate compounds, such as PLGA-Mce.sub.6-DOTA-Gd complexes, having multi-functionality in that the complex may include an MRI contrasting agent linked to a photosensitizing agent.