We report a simple, economical method for generating water-soluble, biocompatible nanocrystals that are colloidally robust and have a small hydrodynamic diameter. The nanocrystal phase transfer technique utilizes a low molecular weight amphiphilic polymer that is formed via maleic anhydride coupling of poly(styrene-co-maleic anhydride) with either ethanolamine or Jeffamine M-1000 polyetheramine. The polymer encapsulated water-soluble nanocrystals exhibit the same optical spectra as those formed initially in organic solvents, preserve photoluminescence intensities, are colloidally stable over a wide pH range (pH 3-13), have a small hydrodynamic diameter, and exhibit low levels of nonspecific binding to cells.