We report a new strategy to minimize the hydrodynamic size of quantum dots (QDs) and to overcome their colloidal stability and photobleaching problems based on the use of multifunctional and multidentate polymer ligands. A novel finding is that a balanced composition of thiol (-SH) and amine (-NH 2) coordinating groups grafted to a linear polymer chain leads to highly compact nanocrystals with exceptional colloidal stability, a strong resistance to photobleaching, and high fluorescence quantum yields. In contrast to the standing brushlike conformation of PEGylated dihydrolipoic acid molecules, mutlidentate polymer ligands can wrap around the QDs in a closed "loops-and-trains" conformation. This structure is highly stable thermodynamically and is responsible for the excellent colloidal and optical properties. We have optimized this process for the preparation of ultrastable CdTe nanocrystals and have found the strategy to be broadly applicable to a wide range of nanocrystalline materials and heterostructures. This work has led to a new generation of bright and stable QDs with small hydrodynamic diameters between 5.6 and 9.7 nm with tunable fluorescence emission from the visible (515 nm) to the near-infrared (720 nm). These QDs are well suited for molecular and cellular imaging applications in which the nanoparticle hydrodynamic size must be minimized.