Prostate cancer (PCa) is one of the most widespread cancer types. The current common method for PCa detection is not accurate enough, leading to an increasing need for an alternative approach for diagnosis. Upon detection, PCa treatment options with cytotoxic agents are limited, as most chemotherapies were found to cause adverse side effects, partially due to high dosing that is required for efficacy. Prostate specific membrane antigen (PSMA) is highly overexpressed in PCa and serves as a promising target its identification and targeting. In order to develop both an accurate diagnostic agent and drug carriers PCa, we developed four nanobodies from camel, with extremely high in vitro affinities towards PSMA. These nanobodies present good and specific binding to PSMA-expressing cell line. Most importantly, our proteins show accumulation in PCa tumors expressing PSMA but not in tumors lacking it in in vivo optical imaging assays. All four variants internalize into PSMA expressing cells. This ability allows the nanobodies to serve as carriers for targeted drug delivery. The nanobody with the highest in vitro affinity, as well as longest clearance time from tumors, was conjugated to doxorubicin. This nanobody-drug conjugate internalizes specifically into PSMA expressing cells, where the doxorubicin is separated from the protein. Cytotoxic activity was observed in vitro in PSMA expressing cells. In vivo, similar tumor growth inhibition was observed in animals treated with doxorubicin alone and animals treated with 20-fold less doxorubicin, conjugated to the nanobody. Our data suggests that conjugation of chemotherapy to a nanobody with high affinity could allow the use of drugs that were previously shown to cause adverse side effect and expand the possibilities to treat different types of cancer.