Over the past few decades, photodynamic therapy has been studied as a therapeutic method by generating singlet oxygen through activation of a photosensitizer (PS) to kill cancer cells. However, the light within the activating wavelength range of commercial photosensitizers has a low penetration depth. In this study, we designed multifunctional upconversion nanoparticles (UCNs) that can emit high-energy light by absorbing low-energy near-infrared (NIR) light with excellent tissue permeability through a fluorescence resonance energy transfer procedure. This process can produce reactive oxygen species by activating the PS. We aimed to optimize the thermal decomposition synthesis procedure to produce lanthanide-doped UCNs with a uniform size and improve the photoluminescence efficiency for an NIR-regulated theranostic system. It was confirmed that the morphologies of UCNs can be controlled by varying the reaction time, reaction temperature, and feed molar ratio of the solvent and reactant. The crystalline morphology of the synthesized UCNs showed a thermodynamically stable hexagonal phase. The photoluminescence efficiency of the UCNs also was influenced by size, surface area, crystalline property, and stability in aqueous solution. Furthermore, the surface-modified UCNs with a folic acid-conjugated block copolymer and PS exhibited enhanced singlet oxygen generation and significantly improved aqueous solubility and photoluminescence efficiency.