Development of a system that can simultaneously sense and scavenge toxic heavy metal ions at low concentrations is an ideal solution for in situ monitoring and purification of contaminated water. In this paper, we report on the synthesis and application of a novel system, luminescent atomically precise cluster-cellulose nanocrystal composite, namely, bovine serum albumin-protected gold nanoclusters (Au@BSA NCs)-loaded cellulose nanocrystal-alginate hydrogel beads, that can simultaneously sense and scavenge heavy metal ions, specifically mercury ions in water. Characterization of the system performed using scanning electron microscopy coupled with energy dispersive spectroscopy and X-ray photoelectron spectroscopy elucidated the physical and chemical characteristics of the system. Additionally, we proposed a new method to visualize the diffusion phenomenon and calculate the effective diffusion coefficient of heavy metal ions in hydrogel beads by monitoring the fluorescence-quenching dynamics of Au@BSA NCs upon binding with mercury ions. Finally, practical applications of this nanocomposite were demonstrated using batch adsorption experiments as well as using a dip pen device loaded with the hydrogel beads for in situ monitoring of heavy metal ions in water. © 2016 American Chemical Society.