Carbon-based quantum dots and their nanocomposites have sparked immense interest for researchers as sensors due to their attractive physico-chemical properties caused by edge effects and quantum confinement. In this review article, we have discussed the synthesis and application of nanocomposites of graphene quantum dots (GQDs) and carbon quantum dots (CQDs). Different synthetic strategies for CQDs, GQDs, and their nanocomposites, are categorized as top-down and bottom-up approaches which include laser ablation, arc-discharge, chemical oxidation, ultrasonication, oxidative cleavage, microwave synthesis, thermal decomposition, solvothermal or hydrothermal method, stepwise organic synthesis, carbonization from small molecules or polymers, and impregnation. A comparison of methodologies is presented. The environmental application of nanocomposites of CQDs/GQDs and pristine quantum dots as sensors are presented in detail. Their applications envisage important domains dealing with the sensing of pollutant molecules. Recent advances and future perspective in the use of CQDs, GQDs, and their nanocomposites as sensors are also explored.