Nanoparticles exhibiting both magnetic and luminescent properties are need of the hour for many biological applications. A single compound exhibiting this combination of properties is uncommon. Herein, we report a strategy to synthesize a bifunctional luminomagnetic Gd2−xEuxO3 (x = 0.05 to 0.5) nanorod, with a diameter of ~20 nm and length in ~0.6 μm, using hydrothermal method. Gd2O3:Eu3+ nanorods have been characterized by studying its structural, optical and magnetic properties. The advantage offered by photoluminescent imaging with Gd2O3:Eu3+ nanorods is that this ultrafine nanorod material exhibits hypersensitive intense red emission (610 nm) with good brightness (quantum yield more than 90%), which is an essential parameter for high-contrast bioimaging, especially for overcoming auto fluorescent background. The utility of luminomagnetic nanorods for biological applications in high-contrast cell imaging capability and cell toxicity to image two human breast cancer cell lines T47D and MDA-MB-231 are also evaluated. Additionally, to understand the significance of shape of the nanostructure, the photoluminescence and paramagnetic characteristic of Gd2O3:Eu3+ nanorods were compared with the spherical nanoparticles of Gd2O3:Eu3+.