Highly luminescent water-soluble InP/ZnS core−shell nanocrystals were prepared using a newly developed method that incorporates reactive phase transfer and photochemical processing. Poor-emitting InP nanocrystals (NCs, 2−4 nm) prepared solvothermally using toluene were transferred into alkaline aqueous solution containing thiol and zinc ions. When these NCs in aqueous solution were subsequently irradiated by ultraviolet (UV) light, they showed intense size-dependent photoluminescence (PL) from green to red due to the formation of a thick (more than 1 nm) ZnS shell on the NCs. The surface dissolution of the NCs, under conditions in which bulk InP does not dissolve due to its covalent bond nature, was observed at two steps: phase transfer and shell formation. This dissolution competed with the formation of the ZnS layer at the start of UV irradiation. Since the UV irradiation enables creation of a thick shell by optimizing the synthesizing conditions, high PL efficiency (30−68%) was obtained in water with sufficient stability. This was quantitatively explained by quantum mechanical calculations. The PL decay behavior of these water-soluble InP/ZnS NCs did not show obvious size-dependence, unlike HF-treated ones. This is attributed to the well-passivated surface states of the NCs due to their thick ZnS shell. The NCs showed a significantly higher In/P ratio than those previously reported. This indicates that In ions were preferentially located on the surface of the InP core in the NCs.