The sol–emulsion–gel method is used for the preparation of about 5–7 nm size Eu₂O₃ doped and coated Y₂SiO₅ nanoparticles at 1300 °C. Here, we report the role of surface coating, dopant concentration and temperature of heating on the modification of crystal structure and the photoluminescence properties of Y₂SiO₅:Eu³⁺ nanocrystals. It is found that photoluminescence properties are sensitive to the crystal structure which is again controlled by surface coating, concentration and heating temperature. The decay times are 0.76, 1.14, 1.23 and 1.40 ms for 0.25, 0.5, 1.0 and 2.5 mol% Eu₂O₃ doped Y₂SiO₅ nanocrystals prepared at 1100 °C (X₁-Y₂SiO₅). However, in X₂-Y₂SiO₅ crystal phase (at 1300 °C) the average decay times are 1.05, 1.35, 1.55 and 1.60 ms for 0.25, 0.5, 1.0 and 2.5 mol% Eu₂O₃ doped Y₂SiO₅ nanocrystals, indicating the photoluminescence properties depend on both the crystal structure and the concentration of ions. The emission intensity of the peak at 612 nm (⁵D₀ → ⁷F₂) of the Eu³⁺-ions is found to be sensitive to the doping and surface coating of Y₂SiO₅ nanocrystals. The decay times are 1.55 and 1.70 ms for 1300 °C heated 1.0 mol% Eu₂O₃ doped and coated Y₂SiO₅ nanocrystals, respectively. Our analysis suggests that the site symmetry of ions plays a most important role in the modification of radiative relaxation mechanisms and as a result on the overall photoluminescence properties.