Carbon quantum dots (CQDs) have gained significant growing attention in the recent past due to their peculiar characteristics including smaller size, high surface area, photoluminescence, chemical stability, facile synthesis and functionalization possibilities. They are carbon nanostructures having less than 10 nm size with fluorescent properties. In recent years, the scientific community is curiously adopting biomass precursors for the preparation of CQDs over the chemical compounds. These biomass sources are sustainable, eco-friendly, inexpensive, widely available and convert waste into valuable materials. Hence in our work the fundamental understating of diverse fabrication methodologies of CQDs, and the types of raw materials employed in recent times, are all examined and correlated comprehensively. Their unique combination of remarkable properties, together with the ease with which they can be fabricated, makes CQDs as promising materials for applications in diverse biomedical fields, in particular for bio-imaging, targeted drug delivery and phototherapy for cancer treatment. The mechanism for luminescence is of considerable significance for leading the synthesis of CQDs with tunable fluorescence emission. Therefore, it is aimed to explore and provide an updated review on (i) the recent progress on the different synthesis methods of biomass-derived CQDs, (ii) the contribution of surface states or functional groups on the luminescence origin and (iii) its potential application for cancer theranostics, concentrating on their fluorescence properties. Finally, we explored the challenges in modification for the synthesis of CQDs from biomass derivatives and the future scope of CQDs in phototherapy for cancer theranostics.