A facile one-step carbonization approach is reported herein for the sustainable hydrothermal synthesis of fluorescent blue nitrogen-doped carbon quantum dots (NCQDs) using banana petioles obtained as biomass waste. These NCQDs were used to design a “turnoff” fluorescent probe, which exhibited excellent sensing capability toward the selective detection of micronutrient, Fe³⁺ ion, with a limit of detection (LOD) of 0.21 nM. The turnoff process involves the formation of a nonradiative charge transfer complex via a photoinduced electron transfer process. The sensor showed a linear range from 5 to 200 nM and was used for the estimation of Fe³⁺ ions in real plant samples. Further, a paper-based assay was developed for the quantitative estimation of Fe³⁺ with LOD values of 0.47 nM for solution-based assay and 0.94 nM for paper-based assay using a smartphone-based readout for potential on-field applications in precision agriculture. Bioimaging studies on banana leaf cells using NCQDs revealed the selective staining of stomata openings on leaf lamella. Therefore, this work provides a way for the valorization of biomass waste into functional nanomaterials without using any extra chemicals.