Fluorescent CdTe nanocrystals (NCs) capped with beta-cyclodextrin (beta-CD) are successfully synthesized by host-guest supramolecular assembly of the hydrophobic alkyl chains of N-acetyl-L-cysteine (NAC) on the surface of CdTe NCs and eco-friendly beta-CD via the promising simple hydrothermal method in our experiments. The as-prepared NCs display better stability and lower toxicity compared with traditional those only capped with NAC. Specially, cytotoxicity experiments to human umbilical vein endothelial cells in vitro and zebrafish embryo toxicological tests in vivo are performed to determine the toxicity of CdTe NCs. For their practical applications, the promising red-luminescent NCs are employed as stable and low poison red phosphors to fabricate white light-emitting diodes (WLEDs) with remarkable color-rendering index (CRI) being 91.6. This research offers significance for solving the difficulty in toxicity and instability of heavy metal based NCs, which has potential applications in future optoelectronic devices and biomarkers.