Photon upconverting nanoparticles (UCNPs) have become an important new class of optical labels. Their unique property of emitting visible light after photo-excitation with near-infrared radiation enables biological imaging without background interference or cell damage. Biological applications require UCNPs that are dispersible in water and allow the attachment of biomolecules. Oleic acid-coated UCNPs obtained by solvothermal synthesis were functionalized with both hydrophilic PEG and thiol-reactive maleimides, either by ligand exchange or by silanization. Three different types of maleimide-functionalized UCNPs were prepared and characterized by transmission electron microscopy, dynamic light scattering and Raman spectroscopy. Ligand exchange of oleic acid by maleimide-PEG-COOH yielded UCNPs that did not aggregate, were colloidally stable and reacted readily with proteins. Such luminescent labels are required for background-free imaging and many other bioanalytical applications.