Photocatalytic water splitting is a promising approach to generating sustainable hydrogen. However, the transport of photoelectrons to the catalyst sites, usually within ps‐to‐ns timescales, is much faster than proton delivery (∼μs), which limits the activity. Therefore, the acceleration of ion of protons from water molecules towards the catalytic sites to keep up with the electron transfer rate can significantly promote hydrogen production. The photobasic effect that is the increase in proton affinity upon excitation offers means to achieve this objective. Herein, we design photobasic carbon dots and identify that internal pyridinic N sites are intrinsically photobasic. This is supported by steady‐state and ultrafast spectroscopic measurements that demonstrate proton ion within a few picoseconds of excitation. Furthermore, we show that in water, they form a unique four‐level lasing scheme with optical gain and stimulated emission. The latter competes with photocatalysis, revealing a rather unique mechanism for efficiency loss, such that the stimulated emission can act as a toggle for photocatalytic activity. This provides additional means of controlling the photocatalytic process and helps the rational design of photocatalytic materials. Pyridinic nitrogen‐containing carbon dots may a proton from the neighbouring water molecules (the so‐called photobasic effect) at the excited state, leading to the significant promotion of photocatalytic performance. Moreover, due to the four‐level energy diagram, the protonated carbon dot shows a net optical gain at the excited state, leading to stimulated emission, revealing a unique competitive mechanism for photocatalytic hydrogen generation.