Carbon quantum dots (CQDs) are a unique class of 0D nanomaterials, featured by a graphitic core and shell layers saturated with hydrogen atoms and functional groups. CQDs are prepared through top‐down and bottom‐up strategies from natural and synthetic precursors. CQDs can be modified through chemical (e.g., surface functionalization/passivation, doping, etc.) and physical (e.g., core–shell architecture, composite material blending, etc.) strategies to control their properties. This review highlights the effect of such modifications on the photophysical properties of CQDs, such as photoluminescence (PL), absorbance, and relaxivity. The dependence of PL upon the size, orientation at the edges, surface and edge functionalization, doping, excitation wavelength, concentration, pH, aggregate formation, etc., are summarized along with the supporting theoretical evidence available in the literature. Also, this review outlines the recent advancements, and future prospective of optical (e.g., sensing, bioimaging, and fluorescent ink) and catalytic applications (e.g., photocatalysis and electrocatalysis) of CQDs enhanced through physical and chemical modifications of their structure and composition.