Ce3+- and Eu3+-doped YPO4 nanorods have been prepared at relatively low temperature (120 °C). A detailed investigation of the role of Ce3+ concentration up to 10 atom % on the luminescence intensity of Eu3+ in Ce3+- and Eu3+-doped YPO4 has been carried out. Phase transformation from a tetragonal to a hexagonal structure occurs with increasing Ce3+ concentrations, and water molecules are also associated during phase transformation. Thermal study shows that water can be retained up to 800 °C in the hexagonal structure. Interestingly, the hexagonal structure returns to the tetragonal structure on annealing above 900 °C. As-prepared and 500 °C heated samples show uniform sized nanorods, whereas a 900 °C heated sample shows distorted nanorods in which pores are present. Initially, the luminescence intensity decreases sharply with increasing Ce3+ concentrations, even for 2 atom %. This is related to the enhanced nonradiative rate as compared to the radiative rate, since multiphonon relaxation to surrounding water molecules increases. This is not due to the possible oxidation−reduction process between Eu3+ and Ce3+ to give Eu2+ and Ce4+, as confirmed by X-ray photoelectron spectroscopy and luminescence studies. Then, a significant enhancement of luminescence intensity occurs on annealing above 900 °C. This can be ascribed to the loss of water molecules during a phase transformation from the hydrated hexagonal to the dehydrated tetragonal phase. To the authors’ knowledge, we for the first time performed a luminescent study with a change of solvent from H2O to D2O, and significant enhancement in luminescence is found.