In this paper we investigate the upconversion luminescence of bulk and nanocrystalline Lu1.98Er0.02O3 following excitation into the I-4(11/2) level using 980 nm radiation. After NIR continuous wave excitation, blue, green, and red emissions were observed for both samples under investigation with the green emission dominating the upconversion spectrum. A power study reveals that the S-4(3/2) (green) and F-4(9/2) (red) emitting levels are populated via two-photon excited-state absorption (ESA) and energy-transfer upconversion (ETU) processes. Upconversion from the P-2(3/2) level is attained via a three-step phonon-assisted energy-transfer process. A marked temperature dependence of the excited-state lifetimes in both the bulk and nanocrystalline samples was evidenced.