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In a medium-sized mixing bowl, combine ¼ cup fish sauce, room temperature water, and 2 to 4 tablespoons of sugar, adjusting the amount based on desired sweetness. Stir until the sugar dissolves completely. (If needed, microwave the mixture for 10 seconds to aid dissolution.)
Mix in the juice of 2 limes, minced garlic, sliced chilis, and shredded carrots. Adjust the flavor by adding more fish sauce or lime juice, to taste.
Allow the sauce to rest for at least 10 minutes to let the flavors meld together.
Garnish with chopped green onions or chives. Serve the fish dipping sauce alongside your favorite seafood dishes or use it as a flavorful dip for spring rolls, grilled meats, or vegetables. Enjoy!