This article delineates the modulation of microstructure of cationic reverse micelle utilizing hydrophobically modified carbon dots (CDs) with varying surface functionalizations. Citric acid was used as the source of the carbon core, and Na-salt of glycine, glycine, Na-salt of 11-aminoundecanoic acid, 11-aminoundecanoic acid, and n-hexadecylamine were used for the surface fabrication of CDs to produce CD 1s, CD 1a, CD 2s, CD 2a, and CD 3, respectively. All these CDs having dimension of 5-7 nm were characterized by spectroscopic and microscopic techniques. The hydrodynamic diameter of cetyltrimethylammonium bromide (CTAB) reverse micelle (CTAB/isooctane/n-hexanol/water) at z ([cosurfactant]/[surfactant]) = 6.4 and W0 ([water]/[surfactant]) = 44 is around 15-20 nm. Interestingly, the size of the water-in-oil (w/o) microemulsions dramatically increased up to 120-200 nm upon doping hydrophobic surface functionalized CD 2a and CD 3. This is possibly due to change in the micellar exchange dynamics and reorganization of the micellar aggregates via hydrophobic interaction between surfactant (CTAB) tail and hydrophobic surface modifier of the carbon dots. However, no alteration in the size of reverse micelles was noted in the presence of carbon dots CD 1s, CD 1a, and CD 2s. Spectroscopic and microscopic investigations confirmed that the hydrophobic CD 2a and CD 3 were localized at the interface of reverse micelles whereas CD 1s, CD 1a, and CD 2s were possibly located in the water pool (away from interface). The activity of Chromobacterium viscosum lipase encapsulated within CD 3 and CD 2a doped significantly large CTAB reverse micelles showed remarkable improvement (3.7-fold and 3.4-fold) in its catalytic response. However, hydrophilic carbon dots CD 1s and CD 2s as well as moderately hydrophobic CD 1a had no significant effect on the microstructure of reverse micelles as well as on the lipase activity.