Sm3+ doped YPO4 spherical nanoparticles are prepared by wet chemical route. Pure YPO4 shows the tetragonal phase, which is stable up to 900 °C, whereas pure SmPO4 shows the phase transition from hexagonal to monoclinic when heated above 800 °C. The (2-10 at.%) Sm3+ doped YPO4 shows the mixture of phases of tetragonal and hexagonal, which transform to the tetragonal phase above 800 °C. Infra-red study could distinguish confined water in the pore of hexagonal phase from water present on the surface of particles. Luminescence intensities of Sm3+ at 564, 601 and 645 nm are weak in case of as-prepared samples because of high non-radiative rate arising from the H2O molecules present in pores of hexagonal lattice. The intensities increase for samples heated up to 900 °C because of increase of extent of radiative rate. Luminescence lifetime increases with increase of heat-treatment up to 900 °C. When solvent of as-prepared sample was changed from the H2O to D2O, 5 times enhancement in luminescence intensity is observed, which can be ascribed to the lower vibration energy of D-O over H-O, which is near to Sm3+. When Y3+ and P5+ ions are substituted by Ca3+ and W3+ up to 3 at.%, there is an enhancement of luminescence. In order to use them as bio-labeling in drug delivery for hyperthermia applications, hybrid of Fe3O4@YPO4:7Sm is prepared and heating up to 45 °C is observed under AC magnetic field.