Upconversion nanophosphors have the ability to generate visible or near-infrared (NIR) emissions under continuous-wave NIR excitation. Utilizing this special photoluminescent properties, upconversion nanophosphors can be used as key components in complex nanocomposites for a wide range of applications. This review summarizes the basic concept, fabrication strategy, and typical application of upconversion-nanophosphor-based functional nanocomposites. The motivation to design these structures comes from the potential applications in detection, multi-modality bioimaging, and NIR light-induced therapy, as well as the tuning of the upconversion luminescence emissions. This review will give a brief summary of this rapidly developing field, and provide guidance to design and to fabricate new nanocomposites based on upconversion nanophosphors.