Conventional methodologies for fabricating carbon dots (CDs) frequently necessitate sophisticated instrumentation, rigorous operational parameters, and noxious chemical agents, thereby raising concerns regarding their sustainability. In this work, we developed an eco-friendly synthetic route for producing nitrogen-doped carbon dots (N-CDs) under mild reaction conditions. The presented approach harnesses consecutive non-enzymatic browning interactions between ascorbic acid and arginine. Upon heating to 60 °C, oxidative decomposition of ascorbic acid produced aldehyde intermediates, subsequently initiating Maillard reactions with arginine to form N-CDs. The resultant N-CDs demonstrated uniform spherical morphology with the mean diameter measuring 20.3 nm, accompanied by outstanding aqueous dispersibility and stable fluorescence emission, achieving a quantum yield of 23.5%. Significantly, these N-CDs exhibited specific sensitivity toward Fe3+, and mechanistic studies confirmed the inner filter effect as the underlying quenching mechanism. The analytical efficacy of N-CDs as fluorescent probes for Fe3+ quantification was validated, revealing linear detection spanning 10–200 µM alongside a detection limit of 2.2 µM. When applied to authentic specimens, the N-CDs delivered satisfactory recovery rates between 98.32% and 110.22%. Furthermore, the N-CDs demonstrated considerable utility as fluorescent inks for anti-counterfeiting purposes. This research presents a sustainable and cost-effective fabrication strategy for N-CDs, emphasizing their prospective applications in environmental surveillance and security printing.