We present a family of water-soluble quantum dots (QDs) that exhibit low nonspecific binding to cells, small hydrodynamic diameter, tunable surface charge, high quantum yield, and good solution stability across a wide pH range. These QDs are amenable to covalent modification via simple carbodiimide coupling chemistry, which is achieved by functionalizing the surface of QDs with a new class of heterobifunctional ligands incorporating dihydrolipoic acid, a short poly(ethylene glycol) (PEG) spacer, and an amine or carboxylate terminus. The covalent attachment of molecules is demonstrated by appending a rhodamine dye to form a QD-dye conjugate exhibiting fluorescence resonance energy transfer (FRET). High-affinity labeling is demonstrated by covalent attachment of streptavidin, thus enabling the tracking of biotinylated epidermal growth factor (EGF) bound to EGF receptor on live cells. In addition, QDs solubilized with the heterobifunctional ligands retain their metal-affinity driven conjugation chemistry with polyhistidine-tagged proteins. This dual functionality is demonstrated by simultaneous covalent attachment of a rhodamine FRET acceptor and binding of polyhistidine-tagged streptavidin on the same nanocrystal to create a targeted QD, which exhibits dual-wavelength emission. Such emission properties could serve as the basis for ratiometric sensing of the cellular receptor’s local chemical environment.