Carbon quantum dots (CQDs), as an important class of carbonaceous nanomaterials, are gaining a lot of attention in various biomedical applications due to their advantageous properties including tunable fluorescence, chemical inertness, water dispersibility, surface functionality, biocompatibility, low cytotoxicity, ease of preparation, and versatility in conjugation with other nanoparticles. The intrinsic physicochemical and optical properties of ultra-small CQDs allow a potential choice in biomedical applications such as cancer therapy, drug or gene delivery, bioimaging, biosensing, photothermal and photodynamic therapy, development of multifunctional diagnostic platforms, and theragnostic nanomedicines. In this outlook, the most recent innovations in the development of CQDs as new quantum-sized fluorescent nanoparticles for nanomedicine are highlighted from their use as drug carriers to multifunctional diagnostic and imaging agents (nanotheranostics, nanotherapeutics, etc.) along with the benefits and limitations of these nanomaterials. Prospects are elucidated with biomedical applications-based CQD nanomaterials for their scalability production, assessing the long-term viability, and stability. The efficacy and safety of CQD-based treatments depend on further investigation into their interaction with nanotechnology and biological systems, and the outcomes of preclinical and clinical trials. Despite achieving significant advancements in this field, there are bountiful chances for further developments on CQD-based nanomedicine to overcome the existing challenges in present technological issues.