Ceria (CeO2) is an exciting alternative noble metal catalyst, because it has ability to release and absorb oxygen in the redox system, and function as an oxygen buffer. In this study, heterostructured catalysts consisting of CeO2/Y2O3 nanocomposites were successfully synthesized by hydrothermal method in the presence of sodium hydroxide as a reducing agent from cerium nitrate and yttrium nitrate as a precursor which was then evaluated for its photocatalytic activity in the degradation of Rhodamine B (RhB) synthetic dye. Scanning electron microscopy (SEM) imparts the surface morphology and size of the prepared sample. Elemental compositions and the purity of the nanoparticles are proved by energy dispersive X-ray Spectroscopy (EDX). CeO2/Y2O3 nanoparticles were made up of CeO and YO bonds which are confirmed by Fourier transform infrared spectroscopy (FTIR). Synthesis temperature and pressure, during hydrothermal reactions, plays a critical role in controlling the shape, size, oxygen vacancy concentration, and low temperature reducibility in CeO2 based nanocomposites. The lattice constants and oxygen vacancy concentrations of ceria nanoparticles also depend upon the concentration of hydroxide ion which leads to better morphology at low temperature and pressure. Hydrogenation of p-nitrophenol to p-aminophenol with a reducing agent is conveniently carried out in aqueous medium by using this binary metal oxide catalyst. Further, the photocatalytic performance of the synthesized nanoparticles was monitored by photocatalytic degradation of Rhodamine B synthetic dye under UV light irradiation. To get maximum photocatalytic degradation (PCD) efficiency, we have used H2O2 for the generation of excess reactive oxygen species (ROS). In addition, the antibacterial activity of nanoparticles against bacteria was also examined. The observed antibacterial activity results are comparable with the results obtained using the standard antibiotic. Display omitted •CeO2/Y2O3 nanocomposites were successfully synthesized by hydrothermal method.•H2O2 for the generation of excess reactive oxygen species (ROS)•Hydrogenation of p-nitrophenol to p-aminophenol with a reducing agent•Specifically lattice planes associated with cubic CeO2 can be observed with SAED.•Observed antibacterial results are comparable with the standard antibiotic activity.