In this study, we propose an eco-friendly approach for synthesizing carbon quantum dots (CQDs) utilizing potato peel as a carbon precursor via a highly efficient one-step hydrothermal method. The structural and chemical properties of the CQDs were comprehensively analysed by employing various techniques. Furthermore, UV–vis and fluorescence spectroscopy were utilized to scrutinize the optical characteristics of the CQDs. The synthesized CQDs exhibit enduring fluorescent attributes, commendable biocompatibility, and a satisfactory quantum yield of 12%. Subsequently, the adsorption efficiency of the nanomaterial was evaluated using methylene blue (MB) dye. Impressively, the CQDs displayed exceptional performance in removing cationic dye, retaining over 78% of removal efficacy even after the fourth cycle of adsorption and desorption, thus indicating robust adsorption capability and reusability. The adsorption kinetics were governed by the pseudo-second order, while the adsorption isotherm adhered to the Freundlich model (R2 = 0.99). The thermodynamic study indicates that the adsorption process is spontaneous (∆G° = − 21.932 kJ mol−1), exothermic (∆H° = -3.95 kJ mol−1) and involves an increase in randomness (∆S° = 0.054 kJ mol−1 K−1) at 333 K. Furthermore, it has been demonstrated that CQDs exhibit anticancer properties against MCF-7 breast cancer cells. The half-maximal inhibitory concentration (IC50) of CQDs, which indicates the concentration necessary to decrease cell viability by 50%, was determined to be approximately 64 μg mL−1.