Here we report the effect of various capping ligands on the optical properties and photostability of CdTe quantum dots in aqueous solutions. Ligand exchange procedure is used to prepare water dispersive CdTe nanocrystals capped with aminoethanethiol, 3-mercaptopropionic and dihydrolipoic acids. The dynamics of photoexcited states is examined by transient photoluminescent spectroscopy. Our results demonstrate that the luminescence intensity of water-dispersible CdTe quantum dots is strongly influenced by molecular oxygen under light irradiation.