In the last two decades, fluorescent carbon quantum dots (CQDs) have attracted intense interest as a new fluorescent nanomaterial with unique properties. This material offers significant advantages compared with conventional dyes and inorganic QD systems, and is used extensively in many different fields, especially in bioimaging and sensor applications. Despite all the positive values they offer, the production of CQD systems with excitation wavelength-dependent nature and high quantum yield (QY) is still a scientific challenge. In this study, we proposed the fabrication of CQD through a facile and easy-to-tune hydrothermal method using cheap and biocompatible precursors such as urea and lactic acid. The effect of experimental parameters including synthesis time, temperature, and mass ratio of the precursors, were determined to obtain the highest QY (48%). The as-prepared nitrogen-doped (N-doped) CQDs exhibited robust stability in the dark and in a wide range of pH values with excitation wavelength-dependent properties. Additionally, CQDs showed remarkable sensitivity and selectivity in the sensing of Fe3+ in blood plasma with a linear correlation in the range of 0–1000 μM, indicating the high potential of CQDs in practical applications. Lastly, cytotoxicity and antibacterial activity tests demonstrated the low toxicity and high biocompatibility of proposed CQDs. Considering the facile and efficient synthetic method, easy-to-tune optical properties, excitation-dependent nature, high fluorescence activity, and low cytotoxicity, we strongly anticipate that N-doped CQDs could provide unique advantages in various biomedical applications including diagnosis, bioimaging, and biosensors.