In this study, a novel core/shell nanocomposite structure (h-BN@Gd2O3 NCs) was created for the first time by combining hexagonal boron nitride (h-BN) with doped gadolinium oxide (Gd2O3) using different laser pulse numbers, i.e., 150, 338, and 772 pulses. We employed various analytical techniques, including mapping analysis, FE-SEM, EDS, HRTEM, SAED, XRD, zeta potential analysis, DLS, FTIR, Raman spectroscopy, and PL measurements, to characterize the synthesized h-BN, c-Gd2O3, and h-BN@Gd2O3 NCs (338 pulses). XRD results indicated hexagonal and cubic crystal structures for BN and Gd2O3, respectively, while EDS confirmed their chemical composition and elemental mapping. Chemical bonds between B–N–Gd, B–N–O, and Gd–O bands at 412, 455, 474, and 520 cm−1 were identified by FTIR analysis. The antimicrobial and anticancer activities of these NCs using agar well diffusion and MTT assays. They exhibited potent antibacterial properties against both Gram-positive and Gram-negative pathogens. Furthermore, NCs have reduced the proliferation of cancerous cells, i.e., human colon adenocarcinoma cells (HT-29) and human breast cancer cells (MCF-7), while not affecting the proliferation of the normal breast cell line (MCF-10). The anticancer efficacy of NCs was validated by the AO/EtBr assay, which confirmed apoptotic cell death. Blood compatibility on human erythrocytes was also confirmed by hemolytic and in vitro toxicity assessments. The compiled results of the study proposed these nanoparticles could be used as a promising drug delivery system and potentially in healthcare applications.