This article explores the tuning of blue to pink colour generation from Li⁺ ion codoped YPO₄:5Eu nanoparticles prepared by polyol method at ∼100-120 ^◦C with ethylene glycol (EG) as a capping agent. Interaction of EG molecules capped on the surface of the nanoparticles and/or created oxygen vacancies induces formation of intermediate/mid gap bands in the host structure, which is supported by UV-Visible absorption data. Strong blue and pink colors can be observed in the cases of asprepared and 500 ^◦C annealed samples, respectively. Co-doping of Li⁺ enhances the emission intensities of intermediate band as well as Eu³⁺. On annealing as-prepared sample to 500 ^◦C, the intermediate band emission intensity decreases, whereas Eu³⁺ emission intensity increases suggesting increase of extent of energy transfer from the intermediate band to Eu³⁺ on annealing. Emission intensity ratio of electric to magnetic dipole transitions of Eu³⁺ can be varied by changing excitation wavelength. The X-ray photoelectron spectroscopy (XPS) study of as-prepared samples confirms the presence of oxygen vacancies and Eu³⁺ but absence of Eu²⁺. Dispersed particles in ethanol and polymer film showthe strong blue color, suggesting that thesematerials will be useful as probes in life science and also in light emitting device applications.