The existence of improper pharmaceutical contaminants in water bodies has endangered the environment and human health worldwide, which makes it ineludible to develop potential dual-functional nanomaterials that not only possess an exceptional luminescence capability but also exhibit simultaneous photodegradation efficiency towards hazardous pharmaceutical residues. Herein, we describe a Dy${}^{3+}$/Eu${}^{3+}$ co-doped NaYF₄ (NP) nanostructure and a NP@GO anchored nanocomposite, effectively synthesized via a hydrothermal approach. The as-prepared NP and NP@GO nanostructures were subjected to structural, morphological and compositional characterizations. Interestingly, due to its superior fluorescence behavior, the synthesized Dy${}^{3+}$/Eu${}^{3+}$ co-doped NaYF₄ (NP) nanophosphor was screened for turn off sensing of the pharmaceutical drug nitrofurazone (NFZ) in aqueous medium via the FRET approach. The as-designed sensor displayed an excellent luminescence turnoff response with a low limit of detection (LOD and high Stern Volmer quenching constant ($K_{\mathrm{sv}}$)). Most importantly, the Dy${}^{3+}$/Eu${}^{3+}$ co-doped NaYF₄ nanosensor exhibits exceptional selectivity towards NFZ with influential anti-interference behavior. In addition, NP and the NP@GO nanocomposite were used for the photodegradation of NFZ. The NP@GO nanocomposite demonstrated significant photocatalytic efficiency for the degradation of NFZ. Within 40 min of solar irradiation, the degradation efficiency of NP and the NP@GO nanocomposite towards NFZ was determined to be 52.4% and 97.5%, respectively. Moreover, the as-synthesized nanocomposite system demonstrated outstanding recyclability for almost three consecutive cycles. Overall, this work outlines a feasible strategy for immediate detection and photocatalytic degradation of NFZ in aqueous medium by employing Dy${}^{3+}$/Eu${}^{3+}$ co-doped NaYF₄ (NP) and NP@GO as a potential dual mode nanomaterial.