The natural anionic polyelectrolyte alginate and its derivatives are of particular interest for pharmaceutical and biomedical applications. Most interesting for such applications are alginate hydrogels, which can be processed into various shapes, self-standing or at surfaces. Increasing efforts are underway to functionalize the alginate macromolecules prior to hydrogel formation in order to overcome the shortcomings of purely ionically cross-linked alginate hydrogels that are hindering the progress of several sophisticated biomedical applications. Particularly promising are derivatives of alginate, which allow simultaneous ionic and covalent cross-linking to improve the physical properties and add biological activity to the hydrogel. This review will report recent progress in alginate modification and functionalization with special focus on synthesis procedures, which completely conserve the ionic functionality of the carboxyl groups along the backbone. Recent advances in analytical techniques and instrumentation supported the goal-directed modification and functionalization.