Facile surface modification of quantum dots (QDs) to make them water-soluble, small, stable, antibiofouling, and functional is crucial for their biological applications. This study demonstrates a simple ligand-exchange reaction to convert hydrophobic CdSe/ZnS QDs into water-soluble QDs using amphiphilic, zwitterionic 11-mercaptoundecylphosphorylcholine (HS-PC). The phosphorylcholine (PC)-modified QDs (QD-PC) possess several advantages, such as small hydrodynamic diameter, good resistance to pH variations and high salinity, excellent stabiliy in 100% human plasma, and low protein adsorption. Importantly, the PC modification endows the QDs with very low, nonspecific interaction with cells, and strongly minimizes nonspecific phagocytosis of QDs by macrophages. In addition, cell penetrating Tat peptide functionalized QDs can be easily produced by mixing Tat with HS-PC with various ratios, which is proved to effectively enhance QD ability to enter cells and accumulate around perinuclear region. Compared to traditional mercaptoundecanoic acid (MUA) modification, PC modification not only makes the cell penetrating QDs more stable and brighter, but also provides the Tat- and PC-conjugated QDs with much lower nonspecific phagocytic uptake than the Tat- and MUA-conjugated ones. This research will provide insights into designing suitable ligands for surface modification of QDs and improving biofunctional QD performance in biological applications.