In this paper, the luminescence, including photoluminescence, upconversion and cathodoluminescence, from single‐crystalline erbium‐doped yttria nanoparticles with an average diameter of 80 nm, synthesized by a molten salt method, is reported. Outstanding luminescent properties, including sharp and well‐resolved photoluminescent lines in the infrared region, outstanding green and red upconversion emissions, and excellent cathodoluminescence, are observed from the nanocrystalline erbium‐doped yttria. Moreover, annealing by the high power laser results in a relatively large increase in photoluminescent emission intensity without causing spectral line shift. These desirable properties make these nanocrystals promising for applications in display, bioanalysis and telecommunications.