A method of highly selective N-terminal modification of proteins as well as peptides by an isolated ketene was developed. Modification of a library of unprotected peptides XSKFR (X varies over 20 natural amino acids) by an alkyne-functionalized ketene (1) at room temperature at pH 6.3 resulted in excellent N-terminal selectivity (modified α-amino group/modified ε-amino group = >99:1) for 13 out of the 20 peptides and moderate-to-high N-terminal selectivity (4:1 to 48:1) for 6 of the 7 remaining peptides. Using an alkyne-functionalized N-hydroxysuccinimide (NHS) ester (2) instead of 1, the modification of peptides XSKFR gave internal lysine-modified peptides for 5 out of the 20 peptides and moderate-to-low N-terminal selectivity (5:1 to 1:4) for 13 out of the 20 peptides. Proteins including insulin, lysozyme, RNaseA, and a therapeutic protein BCArg were selectively N-terminally modified at room temperature using ketene 1, in contrast to the formation of significant or major amounts of di-, tri-, or tetra-modified proteins in the modification by NHS ester 2. The 1-modified proteins were further functionalized by a dansyl azide compound through click chemistry without the need for prior treatment.