Further applications of photocatalysis were limited by the high recombination probability of photo-induced electron–hole pairs in traditional titanium dioxide nanoparticles (TiO2 NPs). Herein, we modified them with rare earth metal via a facile sol–gel method, using tetrabutyl titanate as a precursor and terbium (III) nitrate hexahydrate as terbium (Tb) source. The resulting samples with different Tb doping amounts (from 0 to 2%) have been characterized by X-ray diffraction, UV–visible diffuse reflectance spectroscopy, X-ray photo-electron spectroscopy and a scanning electron microscope. The photocatalytic performance of Tb-doped TiO2 was evaluated by the degradation of methylene blue. The effects of Tb doping amount and initial pH value of solution were investigated in detail. The composite with Tb doping amount of 1.0 wt% showed the highest photocatalytic performance. It exhibited approximately three times enhancement in photocatalytic activity with a reaction rate constant of 0.2314 h−1 when compared with that of commercial P25 (0.0827 h−1). In addition, it presented low toxicity on zebrafishes with 96 h-LC50 of 23.2 mg l−1, and has been proved to be reusable for at least four cycles without significant loss of photocatalytic activity. A probable photocatalytic mechanism of Tb-doped TiO2 was proposed according to the active species trapping experiments. The high photocatalytic performance, excellent reusability and low toxicity of Tb-doped TiO2 indicated that it is a promising candidate material in the future treatment of dye wastewater.