In order to expand the use of titania indoor as well as to increase its overall performance, narrowing the band gap is one of the possibilities to achieve this. Modifying with rare earths (REs) has been relatively unexplored, especially the modification of rutile with rare earth cations. The aim of this study was to find the influence of the modification of TiO2 with rare earths on its structural, optical, morphological, and photocatalytic properties. Titania was synthesized using TiOSO4 as the source of titanium via hydrothermal synthesis procedure at low temperature (200 °C) and modified with selected rare earth elements, namely, Ce, La, and Gd. Structural properties of samples were determined by X-ray powder diffraction (XRD), and the phase ratio was calculated using the Rietveld method. Optical properties were analyzed by ultraviolet and visible light (UV-Vis) spectroscopy. Field emission scanning electron microscope (FE-SEM) was used to determine the morphological properties of samples and to estimate the size of primary crystals. X-ray photoelectron spectroscopy (XPS) was used to determine the chemical bonding properties of samples. Photocatalytic activity of the prepared photocatalysts as well as the titania available on the market (P25) was measured in three different setups, assessing volatile organic compound (VOC) degradation, NOx abatement, and water purification. It was found out that modification with rare earth elements slows down the transformation of anatase and brookite to rutile. Whereas the unmodified sample was composed of only rutile, La- and Gd-modified samples contained anatase and rutile, and Ce-modified samples consisted of anatase, brookite, and rutile. Modification with rare earth metals has turned out to be detrimental to photocatalytic activity. In all cases, pure TiO2 outperformed the modified samples. Cerium-modified TiO2 was the least active sample, despite having a light absorption tail up to 585 nm wavelength. La- and Gd-modified samples did not show a significant shift in light absorption when compared to the pure TiO2 sample. The reason for the lower activity of modified samples was attributed to a greater Ti3+/Ti4+ ratio and a large amount of hydroxyl oxygen found in pure TiO2. All the modified samples had a smaller Ti3+/Ti4+ ratio and less hydroxyl oxygen.