A layered yttrium phosphonate based on N‐(phosphonomethyl)glycine (H3L) and of formula Y(PO3CH2NHCH2COOH)(HPO3CH2NHCH2COOH) was synthesized in mild hydrothermal conditions. Its crystal structure was first determined by single‐crystal X‐ray diffraction. Then, the synthetic parameters were changed in order to reduce the particle size of the compound. The use of microwave (MW) irradiation during the synthesis allowed a) to obtain the compound in form of nanoparticles (NP) in the 50–300 nm range dispersed in water, b) to strongly reduce the reaction time by a factor 150, and c) to successfully introduce into the structure small amounts of a luminescent ion like terbium(III) as an isomorphic substituent of yttrium(III). The obtained NP were used to prepare composite materials by dispersing them in poly(3,4‐ethylenedioxythiophene):poly(styrenesulfonate) (PEDOT:PSS). The resulting optical, photophysical, morphological and electrical properties of modified and pristine PEDOT:PSS films were investigated and compared, in order to test the potential use of Y(H2L)(HL) NP as luminescent downshifting materials in optoelectronic devices.