Quantum dots (QDs) offer distinct advantages over organic dyes and fluorescent proteins for biological imaging applications because of their brightness, photostability, and tunability. However, a major limitation is that single QDs emit fluorescent light in an intermittent on-and-off fashion called "blinking". Here we report the development of blinking-suppressed, relatively compact QDs that are able to maintain their favorable optical properties in aqueous solution. Specifically, we show that a linearly graded alloy shell can be grown on a small CdSe core via a precisely controlled layer-by-layer process, and that this graded shell leads to a dramatic suppression of QD blinking in both organic solvents and water. A substantial portion (>25%) of the resulting QDs does not blink (more than 99% of the time in the bright or "on" state). Theoretical modeling studies indicate that this type of linearly graded shell not only can minimize charge carrier access to surface traps but also can reduce lattice defects, both of which are believed to be responsible for carrier trapping and QD blinking. Further, we have evaluated the biological utility of blinking-suppressed QDs coated with polyethylene glycol (PEG)-based ligands and multidentate ligands. The results demonstrate that their optical properties are largely independent of surface coatings and solvating media, and that the blinking-suppressed QDs can provide continuous trajectories in live-cell receptor tracking studies.