What tools should i use and initially i was planning to use MDbook
It's hard to give specifics without more info, but you want every API reference to link back to its definition.
Say a function is called like `function(arg1, arg2)` then I should be able to click on the arguments to go to their definitions.
You probably want to use Sphinx or Doxygen or something else which can programmatically produce doc from the source code.