Carbon dots (CDs), a rising star in carbon nanomaterials, have attracted enormous attention since their discovery in 2004. Up to now, a large number of approaches have been developed to synthesize CDs, and many efforts have been made to exploit facile, low-cost and large-scale preparation routes. At the same time, photoluminescence (PL) mechanisms of CDs have been tremendously investigated, primarily attributed to surface state, carbon core state, molecule state and their synergistic effect. And on account of their favorable properties, such as excellent optical properties, outstanding biocompatibility, attractive catalytic performance, ultrasmall size, low toxicity and environmental friendliness, CDs have been extensively employed in biomedicine, sensing, catalysis, optoelectronic devices, lubrication, etc. This review comprehensively summarizes the development of synthetic strategies, PL mechanisms and promising applications of CDs. Based on the summary, the prospects and challenges for research into CDs are discussed in depth. This review aims to encourage related researchers to overcome various existing technical challenges, make up the insufficiency of the existing research and tap into the full potential of CDs.