Novel high-thermal stability photoluminescent carbon dots (CDs) with a quantum yield of 50% in water were synthesized using oleic acid as an organic substrate. The synthesized CDs were of the order of 10 nm and exhibit bright green luminescence in the UV spectrum. The nanoparticles possessed analogous physical, chemical, optical and conductive properties in addition to their low cytotoxicity. The surface area and size effect potentialize the CDs for optical and electrical applications. The nanoparticles were also hosted in a cellulose acetate polymer matrix to form a polymer nanocomposite. The CDs and the CD–polymer nanocomposite were characterized by Zeta and particle size analyzer, UV–visible spectroscopy, fluorescence spectroscopy, SEM, XRD, FTIR, TGA and DSC. The CDs were examined and found to exhibit excellent thermal stability within 800 °C. This result paves way for the study of a new class of organic nanoparticles which can be utilized in high-temperature environments.