In this work, we described one pot hydrothermal synthesis of surface modified water soluble YF3: Yb, Er upconverting nanofluorophores (UCNFs) using natural biopolymer chitosan. The obtained nanocrystals have undergone X-ray diffraction (XRD), Fourier transform infrared spectroscopy (FTIR), scanning electron microscopy (SEM), energy dispersive spectroscopy (EDS), high resolution transmission electron microscopy (HRTEM) and photoluminescence (PL) studies. The nanoparticles possess uniform particle size distribution with average size about 27 nm. The cytotoxicity results revealed that the chitosan capped nanoparticles exhibit excellent biocompatibility in human breast cancer cells. In conclusion, the water soluble chitosan capped YF3: Yb, Er nanoparticles could be used as a potential candidate in bio-imaging and therapeutic applications.