This feature article highlights the new development and current status of rare-earth (RE) based core–shell nanocrystals, which is one of the new classes of hybrid nanostructures. Attractive properties of rare-earth based nanomaterials include extremely narrow emission bands, long lifetimes, large Stoke’s shifts, photostability and absence of blinking that can be exploited for biophotonic and photonic applications. Core–shell nanostructures have been attracting a great deal of interest to improve the luminescence efficiency by the elimination of deleterious cross-relaxation. The main focus of this feature article is to address the impacts of core–shell structures on the properties of lanthanide based nanocrystals including crystal phase, lattice strain, downconversion emission, upconversion emission and energy transfer. We describe general synthetic methodologies to design core–shell nanostructure materials. An interesting finding reported is that the local environment of an ion in the core–shell structure significantly affects the modifications of radiative and nonradiative relaxation mechanisms. Finally, a tentative outlook on future developments of this research field is given. Here, we attempt to identify the critical parameters governing the design of luminescent lanthanide based core–shell nanostructures.