Nanotechnology is a remarkable platform for water treatment and mitigation from microorganisms and organic dyes when compared to traditional treatment methods. This research work provides the solution to water pollution by magnetic nanoparticles (NPs) through a Fenton-like reaction at neutral pH and also the reusability of wastewater for wheat seeds growth. Benchmarking of obtained results revealed that the synthesized Fe2O3 nanoparticles (IONPs) degrade methylene blue (MB) dye only in 10 min (k1= 0.3387 min-1, R2 = 0.97 using Langmuir-Hinshelwood model and optimum conditions: 20 mM H2O2, pH 7, 0.22 g/L nanocatalyst, MB=10 mg/L) under dark condition. Fruit industry byproducts can be served as a reliable source of green capping and reducing agents for the synthesis of bio-inspired NPs. So, this unique study reports the synthesis of Fe2O3 NPs from lemon peel extract (LPE). The bio-inspired nanoparticles were characterized by Dynamic light scattering (DLS), UV-Visible spectroscopy, Zeta potential, and X-ray diffractometry (XRD).FESEM images clearly claimed for cubical nanostructure ranges from 40-70 nm, which is further confessed by XRD analysis (42 nm). DLS and Zeta potential described the stability of NPs. FTIR spectroscopy describes the interaction of NPs with different organic compounds of LPE. Antibacterial activity was investigated against gram-positive (Bacillus megaterium, Bacillus subtilis) and gram-negative (Escherichia coli, Salmonella typhimurium) aerobics, gram-positive cocci (Staphylococcus aureus) and antifungal activity were performed against Fusarium solani. Biosynthesized NPs show dose-dependent free radical scavenging activity with DPPH.