Lanthanide-doped iron oxide nanomaterials are potential candidates of current interest for many advanced applications. In this paper, we report on the synthesis of pure and dysprosium (Dy3+) ion doped iron oxide nanostructures, such as ⍺-DyxFe2-xO3 by employing a sol-gel auto combustion method. The pure and doped iron oxide nanostructures have been characterized by employing X-ray diffraction (XRD), transmission electron microscopy (HR-TEM), field emission scanning electron microscopy (FE-SEM), energy dispersive X-ray spectroscopy (EDS) and Raman spectroscopy. The synthesized nanostructures were studied for dielectric, optical and magnetic properties. Dy3+ ion doped ⍺-Fe2O3 nanostructures shows enhancement in the dielectric properties as compared to pure ⍺-Fe2O3. Temperature-dependent conductivity follows Motts law, which confirms the mechanism of variable range hopping in them. Band gap and photoluminescence increases with increase in concentration of Dy3+ ion doping in ⍺-Fe2O3 system. Saturation magnetization increases significantly in doped systems. It was observed that doped systems saturate at low fields (10 kOe) as compared to pure ⍺-Fe2O3 system, which does not saturate up to the maximum applied field (20 kOe). High value of saturation magnetization at low applied magnetic fields, large band gap, enhanced dielectric and efficient photoluminescent properties makes the Dy3+ ion doped iron oxide nanostructures possibly the potential candidates for device applications.