Rapid industrialization and untreated industrial effluents loaded with toxic and carcinogenic contaminants, especially dyes that discharge into environmental waters, have led to a rise in water pollution, with a substantial adverse impact on marine life and humankind. Photocatalytic techniques are one of the most successful methods that help in degradation and/or removal of such contaminants. In recent years, semiconductor quantum dots are being substituted by carbon dots (CDs) as photocatalysts, due to the ease of formation, cost-effectiveness, possible sustainability and scalability, much lower toxicity, and above all its high capacity to harvest sunlight (UV, visible, and near infrared) through electron transfer that enhances the lifetime of the photogenerated charge carriers. A better understanding between the properties of the CDs and their role in photocatalytic degradation of dyes and contaminants is required for the formation of controllable structures and adjustable outcomes. The focus of this review is on CDs and its composites as photocatalysts obtained from different sustainable green as well as chemical precursors. Apart from the synthesis, characterization, and properties of the CDs, the study also highlights the effect of different parameters on the photocatalytic properties of CDs and their composites for catalytic dye degradation mechanisms in detail. Besides the present research development in the field, potential challenges and future perspectives are also presented.