Newly constructed hydrolytically stabilized three-dimensional (3D) Tb-ISH MOF [{Tb2(L)3(µ2-HCOO)(DMF)2(H2O)2}.6H2O·2DMF]n (H2L = 5-hydroxyisophthalic acid) was solvothermally synthesized by incorporating 5-hydroxyisophthalate (L) as a linker. The 3D Tb-ISH MOF was structurally explicated using distinctive (physicochemical, spectral, PXRD, single crystal X-ray, topological, BET, thermal and DFT) studies. The synthesized MOF crystallized in the monoclinic system with C2/m space group and formed a 3D architecture with distorted tricapped trigonal-prismatic geometry. The topological analysis demonstrated that Tb-ISH MOF consists of layers in the plane (001) built with Tb atoms connected by formate and 5‐hydroxyisophalte linkers. The layers in Tb-ISH MOF are bundled together with hydrogen bonds between 5‐hydroxyisophthalate ligand and featured with (6,3)Ia type topology. The fluorescence titration experimental study revealed that Tb-ISH MOF displayed great selectivity and sensitive quenching behaviour towards 2,4,6-trinitrophenol (TNP) and Fe3+ ion with KSV values of 4.00 × 105 and 6.42 × 105 and a detection limit of 1.73 and 1.37 µM, respectively. Further, DFT (B3LYP/6-31G(d) and BET studies were performed in order to comprehend the sensing pathways. Moreover, the recycling experiment also proposed that a chemosensor exhibits fine reversibility without any destruction of framework structure. The present study outlined the great sensitivity, selectivity, and fine recyclability of Tb-ISH MOF in an aqueous system. Thus, the upshot of the overall results may engender more exploration to design and synthesize efficiently responsive chemosensor by encompassing structurally functionalized ligands which could be practically efficacious for the protection of the environment, human health, and homeland security.