Carbon dots have attracted worldwide interest due to their customizable nature, luminescent properties, and exceptional biocompatibility. In particular, biomass-derived carbon dots have attracted attention for their environmentally friendly and cost-effective synthesis. Recent research looks into how polysaccharides can be used to make carbon dots. Using them as starting materials for nanomaterials has benefits in terms of structure, morphology, and doping elements. Although research has extensively examined the optical properties of carbon dots, their potential biological applications have not been thoroughly investigated. This review mainly summarises the cytotoxicity and biological functions of polysaccharide-based carbon dots (e.g. agar, alginate, cellulose, carrageenan, chitosan, chitosan, starch, gelatin, etc.), such as antioxidant, antibacterial and anti-tumor functions, highlighting the different scenarios of the methods of preparation of carbon dots. The applications of carbon dots in food, biomedical sciences, soil fertilization, and power generation are highlighted by reviewing the low toxicity of carbon dots with safety and biocompatibility in human contact. Finally, the importance and challenges of polysaccharide-based carbon dots and the prospects and research directions of polysaccharide-based carbon dots are explained by comparing them with other nanomaterials.