Carbon dots (CDs) are relatively new and one of the most propitious nanomaterials ever known to humanity, primarily consisting of a carbonized carbon core with heteroatoms in organic functional groups attached. CDs show various fascinating properties, such as tunable excitation/emission, chemical inertness, photostability, low toxicity, good biocompatibility, ease of handling, and eco-friendliness. Due to the anomalous optical and chemical properties of the CDs, they have a wide range of applications in the fields of bioimaging, biosensing, photocatalysis, optoelectronics, etc. In this Review, we intend to cover the many strides in CDs chemistry, which is an emerging paradigm, in conjunction with the most recent discoveries of CDs with near-infrared fluorescence, phosphorescence, electroluminescence, chirality, and antibacterial activity. Our main emphasis will be on the contemporary evolution in synthetic strategies, optical properties, and biomedical applications of CDs in nanomedicine and nanotheranostics.