Colloidal oil-soluble Bi2O3 quantum dots (QDs) are synthesized through an alcoholysis route in organic media. Water-soluble Bi2O3 QDs are then obtained from the initial oil-soluble QDs through phase transfer by surface modification with mercaptopropionic acid. X-ray diffraction and transmission electron microscopy studies show that the crystallinity is enhanced and particles grow larger after phase transfer. The water-soluble Bi2O3 QDs exhibit excellent photocatalytic activity for the degradation of methyl orange at a wide range of pH values. After several cycles, the Bi2O3 QDs retain high degradation efficiency. Simulation according to the first-order reaction dynamics indicates that the degradation reaction may follow complicated quasi-homogeneous photocatalysis.