Under 980 nm near-infrared (NIR) excitation, upconversion luminescent (UCL) emission of GdF3:Yb,Er upconversion nanoparticles (UCNPs) synthesized by a simple and green hydrothermal process can be tuned from yellow to red by varying the concentration of dopant Li+ ions. A possible mechanism for enhanced red upconverted radiation is proposed. A layer of silica was coated onto the surface of GdF3:Yb,Er,Li UCNPs to improve their biocompatibility. The silica-coated GdF3:Yb,Er,Li UCNPs show great advantages in cell labeling and in vivo optical imaging. Moreover, GdF3 UCNPs also exhibited a positive contrast effect in T1-weighted magnetic resonance imaging (MRI). These results suggest that the GdF3 UCNPs could act as dual-modality biolabels for optical imaging and MRI.