Cutting fluid (CF) ensures machining accuracy and improves tool life in machining, which is of great significance for its impurity content detection and life cycle evaluation. In this paper, citric acid and arginine were used as carbon and nitrogen sources, photoluminescent (PL) nitrogen-doped carbon quantum dots (N-CDs) with a particle size ranging from 8 to 14 nm and well dispersion in water-based CF were synthesized by a one-pot hydrothermal reaction method. The N-CDs have the best signal under 360 nm ultraviolet light excitation, which well avoids the autofluorescence of the CF. The N-CDs dispersion have good selectivity and linearity in the Fe3+ concentration range of 2 to 80 μM, and the detection limit is 1.2 μM. The N-CDs were used to detect the concentration of Fe3+ in CF with different working hours, and the results were consistent with the results of coupled plasma emission spectroscopy. This study provides an intelligent sensing platform for the highly sensitive and selective detection of Fe3+ in the CF environment, and provides a promising strategy for the evaluation of the CF lifetime.