Semiconductor quantum dots (QDs) and gold nanoparticles (AuNPs) have gained tremendous attention in the last decade as a result of their size-dependent spectroscopic properties. These nanoparticles have been a subject of intense study to bridge the gap between macroscopic and atomic behavior, as well as to generate new materials for novel applications in therapeutics, biological sensing, light emitting devices, microelectronics, lasers, and solar cells. One of the most promising areas for the use of these nanoparticles is in biotechnology, where their size-dependent optical properties are harnessed for imaging and sensing applications. However, these nanoparticles, as synthesized, are often not stable in aqueous media and lack simple and reliable means of covalently linking to biomolecules. The focus of this work is to advance the progress of these nanomaterials for biotechnology by synthesizing them, characterizing their optical properties and rendering them water-soluble and functional while maintaining their coveted optical properties. QDs were synthesized by an organometallic chemical procedure that utilizes coordinating solvents to provide brightly luminescent nanoparticles. The optical interactions of these QDs were studied as a function of concentration to identify particle size-dependent optimal concentrations, where scattering and indirection excitation are minimized and the amount light observed per particle is maximized. Both QDs and AuNPs were rendered water-soluble and stable in a broad range of biologically relevant conditions by using a series of ligands composed of dihydrolipoic acid (DHLA) appended to poly(ethylene glycol) methyl ether. By studying the stability of the surface modified AuNPs, we revealed some interesting information regarding the role of the surface ligand on the nanoparticle stability (i.e. solubility in high salt concentration, resistance to dithiothreitol competition and cyanide decomposition). Furthermore, the nanoparticles were functionalized using a series of bifunctional ligands that contain a dithiol group (DHLA) for surface binding, a PEG segment to instill water-solubility and a terminal functional group for easy bioconjugation (i.e. NH 2 , COOH, or biotin). Finally, a sensing application was demonstrated to detect the presence of microbial DNA (unmethlylated CpG) by using Toll-like receptor 9 proteins as the recognition components and the QDs as the transduction elements via Förster Resonance Energy Transfer.