The multifunctional Fe3O4@Y2O3:Eu3+ nanocomposites were prepared by a facile solvothermal method with Fe3O4 nanoparticles as the core and europium-doped yttrium oxide (Y2O3:Eu3+) as the shell. It is shown that Fe3O4@Y2O3:Eu3+ nanocomposites have a strong photoluminescence and special saturation magnetization Ms of 6.1 emu/g at room temperature. The effects of the magnetic field on the luminescence intensities of the nanocomposites are being discussed. The multifunctional nanocomposites with magnetic resonance response and fluorescence probe properties may be useful in biomedical applications, such as cell separation and bioimaging.