Dual-modal imaging of cancer cells is possible with the silica-coated europium-doped gadolinium oxide nanorods due to their magnetic and luminescent properties. In the synthesized nanorods, europium ions serve as ‘luminescent centers’ facilitating optical imaging and gadolinium oxide acts as the contrast agent for magnetic resonance imaging (MRI). This article reports the synthesis method of the europium-doped gadolinium oxide (Eu:Gd2O[Formula: see text] nanorods by the co-precipitation method. The prepared nanorods are further coated with silica to improve its biocompatibility. From the x-ray diffraction (XRD) data, the crystallinity was found to decrease due to the amorphous nature of the silica. Transmission electron microscopy (TEM) studies show that Eu:Gd2O3 nanorods with a length of [Formula: see text][Formula: see text]600[Formula: see text]nm and diameter of [Formula: see text][Formula: see text]40[Formula: see text]nm were formed. Silica was coated uniformly with the thickness of [Formula: see text][Formula: see text]15[Formula: see text]nm. Fourier transform infrared spectroscopy (FTIR) confirms the presence of silica in the prepared nanorods. Emission at 611[Formula: see text]nm due the presence of Eu[Formula: see text] ions was observed. The life time of uncoated and silica-coated nanorods was calculated to be 1.1[Formula: see text]ms and 0.9[Formula: see text]ms, respectively. In vitro cytotoxicity of the synthesized nanorods in MG63 (human osteosarcoma cell line) was assessed by MTT assay. In vitro MRI studies reveal that the prepared nanorods can be used for T1 contrast enhancement.