Bifunctional nanostructures based on ZnO nanoparticles (NPs) with controlled Gd2O3 shell thicknesses were obtained by simple low-temperature methods (sol–gel technique and seed deposition method). The morphology, nanostructure, phase and chemical composition as well as luminescent and magnetic properties of the obtained core–shell nanostructures were investigated by transmission electron microscopy (HRTEM), energy dispersive x-ray spectroscopy (EDS), x-ray diffraction (XRD) techniques, optical spectroscopy, and SQUID magnetometer. As-obtained ZnO NPs are highly monodispersed and crystalline with mean particles size distribution of about 7 nm. Modification of the ZnO NPs surface by Gd2O3 shell leads to an increase of the ZnO particles size up to 80–160 nm and the formation the Gd2O3 shell with size of 2–4 nm. The dependence of the phase composition, luminescent and magnetic properties on Gd2O3 content are also discussed.