Abstract The development of biomass‐derived nanomaterials like carbon nanotubes (CNT), graphene, and carbon nanofibers has revolutionized multiple domains in the scientific and industrial communities. Notably, quantum dots (QDs), such as carbon quantum dots (CQDs) synthesized from biomass, have garnered significant attention for their synthesis from biomass sources, marking a shift toward sustainability and eco‐friendliness. Quantum dots (QDs) are 0D type of nanoparticles whose properties typically depend on their shape, size, and the type of materials used for synthesis. This review outlines top–down and bottom–up approaches for CQD production from biomass like lignocellulosic and algal sources. It also discusses various characterization techniques focusing on optical and structural properties. Furthermore, the article elaborates on various applications of biomass‐derived CQDs, such as catalysis, supercapacitors, and drug delivery. This article provides a comprehensive overview of CQD synthesis, characterization, and versatile utility using biomass as a green and sustainable source material. This is to be noted that biomass‐derived CQDs demonstrate optical characteristics comparable to or superior to those of metal‐based CQDs, semiconductor quantum dots, and organically synthesized CQDs.