A facile solvothermal route has been developed for the preparation of europium doped gadolinium orthovanadate nanoparticles (~70 nm) with tetragonal structure, based on a homogenous precipitation reaction at 120 °C from rare earth precursors (yttrium nitrate and europium nitrate) and sodium orthovanadate solutions using an ethylene glycol-water mixture as the solvent. The effects of the doping level on the luminescence properties were evaluated in order to find the optimum nanophosphors. These nanocrystals were successfully functionalized with amino (two step process) and carboxylate (one-pot process) groups provided by amino-dextran polymers (AMD) and polyacrylic acid (PAA), respectively. It was found that while the luminescent properties of both kinds of functionalized systems were similar, the colloidal stability of the PAA-modified sample was higher, because of which, it was selected to study their cytotoxicity and magnetic properties (relaxivity and phantom analyses) to assess their potentiality as multifunctional probes for both "in vitro" optical biolabels and negative contrast agents for magnetic resonance imaging.