When aqueously prepared CdTe nanocrystals (NCs) are coated with a SiO2 shell containing Cd ions and a sulfur source, they show a drastic increase in photoluminescence (PL) efficiency with a significant red shift and spectral narrowing after reflux. This is ascribed to the creation of a hybrid structure characterized by the formation of CdS-like clusters in the vicinity of the NCs in the SiO2 shell. Since these clusters are close to the NCs, their effective size increases to reduce the quantum size effect. The dependences of the PL properties on the preparation conditions are systematically investigated. The PL efficiency increases from 28% to 80% in the best case with a red shift of 80 nm. The PL behaviors differ from those of normal CdTe NCs and include less temperature quenching and longer PL lifetime. The SiO2 coating enables bioconjugation with IgG without deterioration of PL efficiency, making hybrid NCs amenable for bioapplication.