Herein, we report a first-principle density functional theory-based study on CdTe nanostructures in 1D (nanorods and nanotubes) and 2D (ultra-thin slabs, monolayers) systems created within the top-down approach in terms of various properties, such as electronic structure, structural stability, and optical properties, and the effect of surface passivation on these properties. A substantial quantum confinement effect is observed with the increase in the energy band gap observed when the thickness or diameter of the nanostructure becomes less than the excitonic Bohr radius of CdTe. For all of the nanostructures studied, the structural stability improves upon surface passivation. The dielectric properties suggest that all of the passivated and specific unpassivated nanostructures are suitable for optoelectronic applications. Among the nanostructures studied, the 2D system prepared in the <110> orientation and the nanotube derived from the <111> monolayer are the most stable and show the least enhancement (0.1–0.2 eV) in the energy band gap upon passivation. This minimal change may be due to significant self-healing in the pristine structures. The charge density plots obtained for the relaxed and unrelaxed pristine structures show the surface had undergone reconstruction as a self-healing mechanism. The stability, self-healing ability, and energy bandgap of these nanostructures suggest their applicability in optoelectronic devices.