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A one-pot, three-component reaction between isatoic anhydride, 1,3-diketones, and amines/arylhydrazines catalyzed by a combination of molecular I2 and Et3N in open-air affords a series of quinazolin-4(3H)-one derivatives in good yield. The protocol offers an operationally simple, facile, and cost-effective pathway utilizing easily accessible reagents under mild reaction conditions with significant substrate scope. The results of steady state and time-resolved absorption and emission spectroscopy indicate the potential of quinazolin-4(3H)-one derivatives as a fluorescence probe. They exhibit unique photophysical responses in different solvent environments. In addition, they can also act as FRET acceptors during interaction with protein lysozyme. Preliminary biological studies indicate that quinazolin-4(3H)-ones are cell permeable and can be used as a fluorescent probe for bio-imaging of human cervical cancer (HeLa) cells. [ABSTRACT FROM AUTHOR]