A facile hydrothermal method to synthesize water-soluble copper indium sulfide (CIS) nanocrystals (NCs) at 150 °C is presented. The obtained samples exhibited three distinct photoluminescence peaks in the red, green and blue spectral regions, corresponding to three size fractions, which could be separated by means of size-selective precipitation. While the red and green emitting fractions consist of 4.5 and 2.5 nm CIS NCs, the blue fraction was identified as in situ formed carbon nanodots showing excitation wavelength dependent emission. When used as light absorbers in quantum dot sensitized solar cells, the individual green and red fractions yielded power conversion efficiencies of 2.9% and 2.6%, respectively. With the unfractionated samples, the efficiency values approaching 5% were obtained. This improvement was mainly due to a significantly enhanced photocurrent arising from complementary panchromatic absorption.