Nanocrystalline titania (EuxTi1–2xNbxO2, x = 0–0.15) co-substituted with europium (Eu) and niobium (Nb) having photoluminescence (PL) and photocatalytic activity was formed as a single phase of anatase-type structure from the precursor solutions of TiOSO4, NbCl5, and EuCl3 under mild hydrothermal conditions using the hydrolysis of urea. The amount of Eu and Nb that can be co-doped into a metastable anatase-type TiO2 lattice under hydrothermal conditions was limited up to 15 mol%, respectively, above which the aeschynite EuTiNbO6 coexisted with anatase. The nanocrystalline titania can be excited by ultraviolet light 395 nm (f–f transition) and emits red light (611 nm) with line spectrum corresponding to 5D0–7F2 transition. The PL intensity increased with increased replacement amount of Eu and Nb. The anatase solid solution co-doped with 5 mol% Eu and 5 mol% Nb (x = 0.05) showed a similar activity to pure anatase (x = 0) on the photodecomposition of methylene blue under UV light irradiation. The anatase-to-rutile phase transformation was delayed via the copresence of Eu and Nb component. In the course of heating and the growth of anatase crystallite, a part of the dopants that could not exist in the titania precipitated as euxenite phase EuTiNbO6 from the anatase at 900°C–1000°C before the phase transformation.