Environmentally benign synthesis of nanocomposite, a pivotal facet of nanotechnology, and gaining prominence due to the increasing demand for facile, sustainable, and safe synthesis methods. The present research reports an facile/cost-effective method for the preparation of carbon dots (CDs) and carbon dot silver nanocomposites ( CD@AgNCs) via a hydrothermal treatment of peanut shells. The well-dispersed and spherical CDs with an average diameter of 5-6 nm were obtained and further employed for the preparation of CD@AgNCs. The formation of CD@AgNCs. was confirmed by optical and microscopic studies and ared shift in the lambda max from 277 nm (CDs) to 450 nm (CD@AgNCs) with a size range of 30-40 nm was observed. The synthesized CD@AgNCs exhibit excellent catalytic potency for the reduction of 4-nitrophenol to 4-aminophenol, and also displaying a unique interaction and sensing ability towards heavy metal ions (Hg2+), causing a pronounced change in color from reddish-brown to transparent with limit of detection (LOD) of 23.47 ppm. Also, the prepared composite exhibit efficient antimicrobial potential against gram-negative (Escherichia coli) bacteria. Consequently, this study delves into a unified effective remediation platform with the integration of catalysis, sensing, and antimicrobial potentials.