This study is a summary of our results on synthesis, functionalization and biomedical application of luminescent lanthanide doped nanoparticles with Y2O3 as host lattice. The nanoparticles (NPs) studied were Y2O3 and Y2O3: Eu 3+ and they are water-monodispersed, synthesized by the sol-gel method and surface modified to be biocompatible with a silica shell. The NPs were conjugated with amine groups and folic acid to detect specific cancer cells. We carried out a complete nanotoxicological evaluation of NPs in HeLa and MCF-7 cancer cells and fibroblast (L929) cell line. Our results corroborate the bio- and hemo-compatibility of NPs. No in vitro inflammatory response mediated by macrophages was elicited and no genotoxic effect was scored by comet assay. Internalization of folic acid-functionalized NPs was detected by flow cytometry comparing the internal cellular complexity and the cytoplasmic localization of NPs was confirmed by confocal microscopy. We provide with more evidences to warranty the biosafety of down conversion nanoparticles based on Y2O3: Eu 3+ and functionalized with folic acid for further biomedical and bio-imaging applications.