Lanthanide‐based upconverting nanoparticles (UCNPs) are largely sought‐after for biomedical applications ranging from bioimaging to therapy. A straightforward strategy is proposed here using the naturally sourced polymer phytoglycogen to coencapsulate UCNPs with hydrophobic photosensitizers as an optical imaging platform and light‐induced therapeutic agents. The resulting multifunctional sub‐micrometer‐sized luminescent beads are shown to be cytocompatible as carrier materials, which encourages the assessment of their potential in biomedical applications. The loading of UCNPs of various elemental compositions enables multicolor hyperspectral imaging of the UCNP‐loaded beads, endowing these materials with the potential to serve as luminescent tags for multiplexed imaging or simultaneous detection of different moieties under near‐infrared (NIR) excitation. Coencapsulation of UCNPs and Rose Bengal opens the door for potential application of these microcarriers for collagen crosslinking. Alternatively, coloading UCNPs with Chlorin e6 enables NIR‐light triggered generation of reactive oxygen species. Overall, the developed encapsulation methodology offers a straightforward and noncytotoxic strategy yielding water‐dispersible UCNPs while preserving their bright and color‐tunable upconversion emission that would allow them to fulfill their potential as multifunctional platforms for biomedical applications.