Two-dimensional tungsten diselenide (WSe2) has received intense interest as a multifunctional semiconducting material for its distinctive electronic structure, outstanding photonic and catalytic properties. In particular, the dark exciton emission of WSe2, which is enhanced with increasing temperature, makes it extremely promising for room-temperature optoelectronic devices with bright emissions. By manipulating the lateral dimensions of WSe2 to form quantum dots (QDs) thus controlling their electronic band gaps via quantum confinement effect, a broad range of emission wavelengths can be achieved and the band edge positions are optimized for electro/photocatalytic water splitting. Further developing this technology requires us to understand the fundamental mechanisms and limitations behind different synthesis techniques to control the size, morphology, and quality of the WSe2 QDs. Hereby, we review the recent progress in state-of-the-art synthesis techniques of WSe2 QDs and their applications. A new theoretical insight correlating the down-sizing limit of WSe2 QDs with different synthesis conditions is developed for guiding the synthesis of QDs with optimal sizes. From here, we review the fundamental science underpinning the exotic physical and chemical properties of WSe2 QDs and how they are correlated with the QD sizes and morphologies. Finally, we highlight the critical challenges towards high-throughput production of high-quality, homogeneous WSe2 QDs and their potential applications.