Herein, we report the synthesis, characterization, and photocatalytic and sensing capabilities of crystalline Fe-doped ZnO nanoellipsoids (NEs). These NEs were synthesized by a low-temperature simple solution process and were characterized with respect to their structural, morphological, optical, compositional, photocatalytic and sensing properties. The detailed studies confirmed that the synthesized NEs were grown in high density possessing wurtzite hexagonal phase and exhibiting good optical properties. Further, the NEs were applied as a photocatalyst for the photocatalytic degradation of various harmful organic dyes such as methyl orange (MO), rhodamine B (RhB) and methylene blue (MB). Interestingly, it was observed that MB and RhB dyes undergo almost 100% photodegradation with 15–60 min, however, MO dye requires 90 min for the degradation. It is also found that picric acid quenches the luminescence of the NEs (with excitation/emission maxima of 380/392 nm). This finding is exploited in a luminescent assay for picric acid with a 2.9 μM lower detection limit and a linear range that extends from 5 to 60 μmol L⁻¹. The results show that simply synthesized Fe-doped ZnO nanomaterials can efficiently be used for the photocatalytic and sensing applications.