Lanthanide doped nanoparticles (Ln:NPs) hold promise as novel luminescent probes for numerous applications in nanobiophotonics. Despite excellent photostability, narrowband photoluminescence, efficient anti-Stokes emission and long luminescence lifetimes, which are needed to meet the requirements of multiplexed and background free detection at prolonged observation times, concern about their toxicity is still an issue for both in vivo and in vitro applications. Similar to other chemicals or pharmaceuticals, the very same properties that are desirable and potentially useful from a biomedical perspective can also give rise to unexpected and hazardous toxicities. In engineered bionanomaterials, the potentially harmful effects may originate not only from their chemical composition but also from their small size. The latter property enables the nanoparticles to bypass the biological barriers, thus allowing deep tissue penetration and the accumulation of the nanoparticles in a number of organs. In addition, nanoparticles are known to possess high surface chemical reactivity as well as a large surface-to-volume ratio, which may seriously affect their biocompatibility. Herein we survey the underlying mechanisms of nanotoxicity and provide an overview on the nanotoxicity of lanthanides and of upconverting nanoparticles.