The research work presented in this thesis focuses on the fabrication of rare earth (RE) doped nanomaterials as potential contrast agents for optical and magnetic resonance imaging. Owing to the sharp and intense emission obtained over the range of visible to the near-infrared regions in a wide variety of hosts, RE-doped nanomaterials have attracted strong interests as contrast agents in bioimaging applications. The current study has successfully demonstrated the fabrication of fluorescent, and bifunctional magnetic-fluorescent RE-doped nanomaterials as contrast agents for bioimaging. At first, doping of different RE ions in yttrium oxide (Y2O3) host was investigated to fabricate the down- and up-conversion fluorescent nanoparticles. Effect of different synthesis parameters and type of RE dopants was investigated, and optimum conditions in relation to synthesis temperature, time, and concentration of RE dopants were reported and discussed. Spherical nanocrystals and nanorods could selectively be produced by varying different synthesis conditions. An evolution mechanism has been proposed to elucidate the morphology transformation to nanorods from nanocrystals.