Bismuth oxyselenide (Bi2O2Se) nanosheets, a new 2D non-van der Waals nanomaterial having unique semiconducting properties, could be favorable for various sensing applications. In the present report, a top-down chemical approach was adopted to synthesize ultrathin Bi2O2Se quantum dots (QDs) in an appropriate solution. The as-prepared 2D Bi2O2Se QDs with an average size of ∼3 nm, exhibiting strong visible fluorescence, were utilized for heavy-metal ion detection with high selectivity. The QDs show a high optical band gap and a reasonably high fluorescence quantum yield (∼4%) in the green region without any functionalization. A series of heavy metal ions were detected using these QDs. The as-prepared QDs exhibit selective detection of Fe3+ over a wide dynamic range with a high quenching ratio and a low detection limit (<0.5 μM). The mechanism of visible fluorescence and Fe3+ ion-induced quenching was investigated in detail based on a model involving adsorption and charge transfer. Density functional theory (DFT) first principles calculations show that fluorescence quenching occurred selectively due to the efficient trapping of electrons in the bandgap states created by the Fe atoms. This work presents a sustainable and scalable method to synthesize 2D Bi2O2Se QDs for heavy metal ion sensing over a wide dynamic range and these 2D QDs could find potential uses in gas sensors, biosensors and optoelectronics.