Cellulose nanocrystals are converted into fluorescent labeling nanoparticles (Py‐CNC) by a three‐step procedure. The fluorescence emission of pyrene is enhanced after the modification to cellulose nanocrystals. Py‐CNC is evaluated for its sensing ability towards metal ions and exhibits high selectivity towards Fe3+ among other screened metal ions with good discrimination between Fe2+ and Fe3+. The excellent selectivity for Fe3+ over a wide linear concentration range is observed through changes in the emission spectra. Spectroscopic analyses prove that the coordination interaction between Fe3+ and pyrene‐modified cellulose nanocrystals leads to the recognition process. This sensing nanomaterial can be employed as a chemosensor for Fe3+ and promoted for many applications in chemical, environmental, and biological systems.