Red-emission phosphor europium-doped yttria (Eu³⁺:Y₂O₃) nanoparticles have been successfully filled into the nanocavity of carbon nanotubes (CNTs) via supercritical reaction and supercritical fluids followed by calcination. The existence of Eu³⁺:Y₂O₃ nanoparticles inside CNTs was characterized by TEM, EDS and XRD. The as-prepared nanomaterials (Eu³⁺:Y₂O₃@CNTs) exhibited strong red-emission at 610 nm, which corresponded to ⁵D₀ → ⁷F₂ transition within Eu³⁺ ions. It showed that the existence of the walls of the CNTs did not quench the luminescence of Eu³⁺:Y₂O₃. Due to the surface modification with Tween 80, Eu³⁺:Y₂O₃@CNTs had good water solubility. In vitro cytotoxicity studies showed that the as-prepared nanomaterials had low toxicity on HeLa cells at concentrations of 10–1000 μg mL⁻¹. And their use as luminescence probes for live cell imaging was demonstrated by using inverted fluorescence microscopy. With the advantages of the easy dispersion in water, low toxicity, and good photoluminescence (PL) properties, the as-prepared Eu³⁺:Y₂O₃@CNTs could potentially be used as nanophosphors in bio-imaging.