Here, we report synthesis of pure crystalline nanopowders of yttrium orthophosphate Y0.95Er0.05PO4 with xenotime-type structure and hydrate of yttrium orthophosphate Y0.95Er0.05PO4⋅0.8H2O with rhabdophane-type structure using microwave-hydrothermal treatment of freshly precipitated gels. To establish phase composition of the synthesized nanopowders, we have carried out XRD analysis. Also, we have investigated their morphology by means of TEM and SAXS. We have registered scattered reflection spectra for synthesized Y0.95Er0.05PO4 and Y0.95Er0.05PO4⋅0.8H2O powders. Also, we have obtained luminescent spectra of these nanocrystalline samples for 4I13/2 → 4I15/2 transition of Er3+ ion with excitation of 4I11/2 level. We have proposed the mode of application of nanocrystalline powders Y0.95Er0.05PO4 and Y0.95Er0.05PO4⋅0.8H2O for the development of composite materials based on polymer capsules that are being used in targeted drug delivery.