In the present work, terbium-doped yttrium hydroxide was successfully synthesized by the microwave-assisted hydrothermal method using yttrium nitrate, terbium chloride, and lithium hydroxide as precursors; the study is based on samples with different terbium concentrations. X-ray diffraction indicates a pure hexagonal structure corresponding with the Y(OH)3 structure, as well as a preferential growth along (110) planes for the Tb-doped samples. FTIR confirms the presence of Y–OH bonds and no adsorbed nitrogen or N–O bonds. SEM images indicate the formation of rods smaller than 1 μm in length and diameters ranging from 80 to 55 nm while TEM images confirm the presence of large areas corresponding to (110) planes. The sample doped at 4 at.% presented the maximum photoluminescent intensity, though the sample doped at 2 at.% presented the highest values of quantum yield (23.5%). Quantum yield values decay with terbium concentration to a value of 7.89% for the 10 at.% concentration, such changes are attributed to a quenching effect and to differences in the photon-extraction efficiency. Photoluminescence decay time values decrease monotonically from 1.133 for the 2 at.% sample to 0.453 ms for the sample doped at 10 at.%, such behavior is attributed to a self-stimulated emission.