Carbon dots (CDs) have generated much interest because of their significant fluorescence (FL) properties, extraordinary photophysical attributes, and long-term colloidal stability. CDs have been regarded as a prospective carbon nanomaterial for various sensing applications because of their low toxicity, strong and broad optical absorption, high chemical stability, rapid transfer properties, and easy modification. To improve their functionality, CD/polymer composites have been developed by integrating polymers into CDs. CD/polymer composites have diversified because of their easy preparation and applications in sensing, optoelectronics, semiconductors, molecular delivery, and various commercial fields. Many review articles are available regarding the preparation and applications of CDs. Some review articles describing the production and multiple applications of the composites are available. However, no such article has focused on the types of precursors, optical properties, coating characteristics, and specific sensing applications of CD/polymer composites. This review aimed to highlight and summarize the current progress of CD/polymer composites in the last five years (2017–2021). First, we overview the precursors used for deriving CDs and CD/polymer composites, synthesis methods for preparing CDs and CD/polymer composites, and the optical properties (absorbance, FL, emission color, and quantum yield) and coating characteristics of the composites. Most carbon and polymer precursors were dominated by synthetic precursors, with citric acid and polyvinyl alcohol widely utilized as carbon and polymer precursors, respectively. Hydrothermal treatment for CDs and interfacial polymerization for CDs/polymers were frequently performed. The optical properties of CDs and CD/polymer composites were almost identical, denoting that the optical characters of CDs were well-maintained in the composites. Then, the chemical, biological, and physical sensing applications of CD/polymer composites are categorized and discussed. The CD/polymer composites showed good performance as chemical, biological, and physical sensors for numerous targets based on FL quenching efficiency. Finally, remaining challenges and future perspectives for CD/polymer composites are provided.