We report powder neutron diffraction studies in La_0.95PO₄:Eu_0.05 (LaPO₄:Eu) at various temperatures up to 1163 K. From Rietveld refinement of the diffraction data, we identify the presence of water up to 567 K and an irreversible phase transition from hexagonal to monoclinic structure around 900 K involving the coexistence of phases over 700 to 1050 K. We observe from the neutron experiments that the thermal expansion in the hexagonal phase is much smaller than that in the monoclinic phase. We have performed first-principles lattice dynamics calculations in both the phases to identify the anharmonic phonons and thereby understand the thermal expansion behavior. The low-energy translational and librational modes of PO₄ tetrahedral units in the hexagonal phase show negative thermal expansion behavior, which is responsible for the overall smaller positive thermal expansion coefficient in the hexagonal phase in comparison to that in the monoclinic phase.