The preparation and investigation of Fe(III) doped carbon nanodots (CNDs) with intense green photoluminescence and emission dependence on the dispersion medium are reported. Their unusual photoluminescence is especially highlighted in water where the initial blue emission is gradually shifted to intense deep green, while in other common solvents (chloroform, acetone etc.) this behavior has not been observed. Through embedding in a polymer matrix (e.g., PVA) the color transition becomes reversible and dependent on water content, ranging from a full blue emission, when completely dried, to an intense green emission, when wetted. The preparation path of the Fe(III) doped CNDs undergoes two main stages involving the initial obtaining of Fe(III)-N-Hydroxyphthalimide complex and then a thermal processing through controlled pyrolysis. Morphostructural investigations of the prepared Fe(III) doped CNDs were performed through TG, FT-IR, XPS, DLS, TEM and AFM techniques whereas absolute PLQY, steady state and lifetime fluorescence were used to highlight their luminescence properties. The results issued from structural and fluorescence investigations bring new insights on the particular mechanisms involved in CNDs photoluminescence, a topic still open to debate.