Fluorescent silicon nanoparticles (SiNPs) might be one of the excellent candidates for use as optical markers in biological profiling and diagnostic applications. To exploit this perspective, they ought to be essentially synthesized from any green precursor rich in silicon. Stable dispersibility in water along with prolonged luminescence under different conditions is also desired. Moreover, one of the main challenges is to produce such optically (photoluminescence) stable and water-dispersible SiNPs. In our present work, we have reported the synthesis of a highly stable silicon nanoparticle aqueous suspension via a single-step microwave-assisted facile green route. Our as-prepared SiNPs exhibit inherent stable dispersibility, strong fluorescence, and photo-stable behavior. The experimental results demonstrate that the synthesized SiNPs are highly suitable for the detection of Fe(III) ions. This optical sensing study opens a new avenue for use of SiNPs as a valuable optical probe in chemosensory applications. Our results provide a single-step methodology for the synthesis of highly stable SiNPs from a biological precursor, which can be used as a promising tool for various chemical and biological applications.