In the current work, we present the results of nanocrystalline lanthanum orthovanadate (LaVO4) doped with dysprosium ions, which was synthesized by a high-energy ball milling (HEBM) process. Lanthanum, vanadium, and dysprosium oxides were employed as starting reagents. These materials were turned into LaVO4:Dy3+ powder with two polymorphic phases after HEBM and subsequent heating that was carried out in the air in the temperature range from 800 °C to 1200 °C. X-ray powder diffraction (XRD), scanning electron microscopy (SEM), and DRS (UV–vis) spectroscopy were used to characterize the obtained Dy-doped LaVO4 powders. The excitation and photoluminescence (PL) emission spectra, and time decay (lifetime) curves of the dysprosium (III) ions in LaVO4 material were measured and analyzed. The influence of annealing temperature and the concentration of dysprosium (III) ions (1%, 2%, and 3% at.) on spectroscopic properties was discussed. The qualitative phase analysis of Dy-doped LaVO4 powders indicated the dominant presence of a monoclinic LaVO4 structure. The presence of the tetragonal solid-solution (La, Dy)VO4 phase was also revealed. The structural transformation consists of an increase of Zr type LaVO4:Dy3+ phase, resulting in a higher structure and site symmetry of t-LaVO4:Dy3+. With increasing Dy3+ content, the relative fraction of the tetragonal (La, Dy)VO4 phase was also increased in all samples. Furthermore, XRD investigations showed that Dy3+ ions were incorporated mainly into the t-(La, Dy)VO4 structure. The increase of the amount of tetragonal phase in polymorphic LaVO4:Dy3+ material results in higher emission intensity caused by more efficient energy transfer from VO43− vanadate group to Dy3+ ions. The average sizes of the m-LaVO4 crystallites, estimated using the Rietveld method, were in a narrow range from 53 to 77 nm. Two main intense emission peaks were observed in the blue (466–495 nm) and yellow (557–594 nm) wavelength ranges and can be ascribed to transitions involving 4F9/2 to the stark split sublevels of 6H15/2 and 6H13/2, respectively. The overall intensity of the emission strongly depends on the annealing temperature. The best results were achieved for powder heated at 1200 °C. The values of the calculated average decay lifetime τavg of the LaVO4 powders doped with 1%, 2%, and 3% at. Dy heated at 800 °C, 1000 °C and 1200 °C were very similar, but one can observe that with increasing heating temperature the average decay lifetime of LaVO4:Dy powders slightly decreased regardless of the Dy concentration.