Layered rare-earth hydroxides (LRHs) with high anion exchangeability between the hydroxocation layers, where a large variety of organic anions can be sheltered, are employed to construct hybrid systems that slowly release active organic ingredients. More importantly, it is possible to endow LRHs with a photoluminescence capability by doping activator ions such as Ce3+, Eu3+, and Tb3+ into matrices. In the present work, we explored Tb3+-doped layered yttrium hydroxide Y1.80Tb0.20(OH)5Cl· nH2O (LYH:Tb) nanosheets as a luminescent carrier for sustained release of salicylic acid (2-hydroxybenzoic acid), an example of nonsteroidal anti-inflammatory drugs and antimicrobial agents. Salicylate (sal) was intercalated into the interlayer gallery of LYH:Tb via a direct ion-exchange reaction. An observed variation in basal spacing suggested that salicylate anions are arranged in an interdigitated bilayer manner in the interlayer space of LYH:Tb. As generally observed in organic/inorganic hybrid systems, the thermal and photostabilities of salicylate were significantly improved after intercalation compared to its free state. The release kinetics of salicylate from sal-LYH:Tb hybrids in a saline solution at pH = 7.4 showed a highly sustained release of salicylate. Among various examined mathematical models, the parabolic diffusion equation best described the cumulative salicylate release. In particular, the salicylate intercalation led to the characteristic 5D4 → 7F J ( J = 6, 5, and 4) green emission of Tb3+ by its sensitization followed by the energy transfer to sal-LYH:Tb, whereas typical blue emission of salicylate was recovered after its release from the interlayer gallery of the LYH:Tb carrier. This green/blue luminescence change behavior provides a useful technique for in situ monitoring of the delivery and release of salicylate at target sites. The sal-LYH:Tb hybrid, with antimicrobial properties, was readily dispersed into a biodegradable polymer, polyvinyl alcohol, to prepare a transparent, UV-shielding, and luminescent composite that is applicable as an antimicrobial polymer to retard or prevent microbial growth.