Highly-luminescent nanophosphors have a decisive role in solid-state lighting (SSL) as well as in field emission display (FED) applications due to their potential use in fabrication of nanophosphor based FED and solid state display devices. Herein, the red emitting highly-luminescent Eu(3+)-Li(+) co-doped magnesium aluminate (MgAl2O4) nanophosphors were synthesized by a customized sol-gel route with an average particle size of 18 nm, which can be easily scaled up in a large quantity. The resulting nanophosphor exhibits hypersensitive red emission, peaking at 615 nm upon 394 nm excitation. Furthermore, comparative photoluminescence (PL) studies have been carried out for Eu(3+) doped and Eu(3+) doped-Li(+) co-doped magnesium aluminate (Li(+) co-doped MgAl2O4:Eu(3+)) nanophosphors, which indicated that Li(+) co-doping significantly improves luminescence intensity along with good crystallinity. Moreover, the charge compensation by addition of Li(+) co-activator in MgAl2O4:Eu(3+) lattice led to the two fold enhancement of PL intensity. The obtained results suggest that this nanophosphor could be an ultimate choice for next generation advanced luminescent nanomaterials for solid state lighting and portable FED devices.