Quantification of molecular oxygen in liquid phases is an important analytical problem in the fields of chemistry, food industry, biomedicine, environmental monitoring, and safety at work. In this paper, we prepared a β-diketone-modified Eu (III)-doped yttrium hydroxide nanosheet (Y(Eu)NNS) to obtain a novel oxygen sensor which can detect the dissolved oxygen based on luminescence intensity quenching. The narrow luminescence bands of the Eu (III)-doped yttrium hydroxide nanosheet are particularly suitable for oxygen detection because of the large stokes shift and excellent luminescence performance. The prepared rare earth nanosheets feature all advantages of rare earth complexes, not only displaying unique chemical and physical properties due to the unusual structural features such as excellent two-dimensional anisotropy, but also enhanced luminescence and higher stability compared to rare earth complexes. The Y(Eu)NNS formed film with high photostability exhibited high sensitivity and a well-linear response, making it a promising material for dissolved oxygen sensing and optical fiber sensing.