In this paper, we report the facile synthesis of a bifunctional inorganic nanocomposite which is composed of core-shell structured mesoporous silica coated with up-conversion Gd2O3 : Er3+ particles. X-ray diffraction (XRD), scanning electron microscopy (SEM), transmission electron microscopy (TEM), N2 adsorption/desorption, and photoluminescence (PL) spectra were used to characterize the samples. The results indicate that the nanocomposite with general 50 nm shell thickness and 300 nm core size shows typical ordered mesoporous characteristics (2.3 nm) and has spherical morphology with smooth surface and narrow size distribution. The bifunctional system shows unique green up-conversion emission under 980 nm NIR laser excitation even after loading with drug molecules. In addition, biocompatibility tests on L929 fibroblast cells using an MTT assay reveals low cytotoxicity of the system. Drug release tests suggest that the nanocomposite has a controlled drug release property with ibuprofen (IBU) as the model drug. Interestingly, the up-conversion emission intensity of the bifunctional carrier increases with the released amount of model drug, thus allowing the release process to be monitored and tracked by the change of up-conversion luminescence intensity. This composite can potentially act as a functional drug carrier system.