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Fe3O4@Y2O3:Eu3+ nanocomposites and Y2O3:Eu3+ nanophosphors were synthesized using the hydrothermal method. Nanocomposites were analyzed using X-ray diffraction (XRD), Rietveld refinements, Fourier transform infrared spectroscopy (FTIR), Raman spectroscopy, photoluminescence (PL), vibrating sample magnetometer (VSM), and high-resolution transmission electron microscopy (HRTEM). Nanocomposites exhibit superparamagnetic behavior that improves with Eu3+, resulting in increased magnetic saturation. In contrast to Y2O3:Eu3+ nanophosphors, the Fe3O4@Y2O3:Eu3+ nanocomposites display a distinctive characteristic whereby the photoluminescence intensity increases with a reduced concentration of Eu3+. The requirement of increasing the thickness of the Y2O3:Eu3+ outer layer to achieve improved light emission can be circumvented by solely manipulating the concentration of activators, without compromising the magnetic saturation of the nanocomposites. The luminescent and magnetic characteristics of Fe3O4@Y2O3:Eu3+ nanocomposites can be readily optimized using straightforward synthesis parameters, making them promising candidates for potential applications in theranostic medicine. [ABSTRACT FROM AUTHOR]