Carbon dots, generally referring to small carbon nanoparticles with various levels of surface passivation, have emerged as a new class of quantum dot-like fluorescent nanomaterials. Since the original report in 2006, carbon dots have been investigated by many research groups worldwide, with major advances already made in their syntheses, structural and mechanistic understandings, and evaluations for biocompatibilities and potential bio-applications. In this article, representative studies responsible for these advances in the development and understanding of carbon dots are reviewed, and those targeting the use of carbon dots as high-performance yet nontoxic fluorescence agents for optical bioimaging in vitro and in vivo are highlighted and discussed.