Due to the exceptional optical properties such as biocompatibility, and low toxicity, carbon nanodots (CNDs) have emerged as a potential material for biosensing, drug delivery, and bioimaging. As a result, CNDs preparation, properties, and applications have sparked much attention. Its advantages include great biocompatibility in vitro and in vivo, photobleaching resistance, ease of surface functionalization and bioconjugation, excellent colloidal stability, environmentally safe manufacturing, and low cost. This allowed CNDs to replace traditional fluorescent heavy metal-containing semiconductor quantum dots or organic dyes. CNDs have demonstrated a wide range of applications, despite the fact that the mechanism of their photoluminescence remains a mystery. In this review, we examine current advancements in the field of CNDs and provide a complete overview of their synthesis techniques and emission processes along with their applications in biosensing, drug delivery, bioimaging, wound healing, and disease detection biosensors.