Fibroblast growth factor 21 (FGF21) is involved in regulating energy metabolism, and it has shown significant promise as a treatment for type II diabetes; however, the native protein has a very short circulating half-life necessitating frequent injections to maintain a physiological effect. Polyethylene glycol (PEG) conjugation to proteins has been used as a method for extending the circulating half-life of many pharmaceutical proteins; however, PEG does carry the risk of vacuole formation, particularly in the renal tubular epithelium. Since renal vacuole formation may be particularly problematic for diabetic patients, we engineered site-directed PEGylated variants of FGF21 with sustained potency and minimized vacuole formation. This was accomplished both by probing the site of PEGylation on FGF21 as well as by examining various PEG configurations. While the site of PEGylation has a significant impact on the bioactivity of FGF21, it has only a marginal impact on vacuole formation; however, the configuration and number of PEGs conjugated to the protein has a much more profound effect on vacuologenesis.