The properties of β-NaEuF4/NaGdF4 core-shell nanocrystals have been thoroughly investigated. Nanoparticles with narrow size distribution and an overall diameter of ∼22 nm have been produced with either small β-NaEuF4 cores (∼3 nm diameter) or large β-NaEuF4 cores (∼18 nm diameter). The structural properties and core-shell formation are investigated by X-ray diffraction, transmission electron microscopy and electron paramagnetic resonance, respectively. Optical luminescence measurements and X-ray photoelectron spectroscopy are employed to gain information about the optical emission bands and valence states of the rare earth constituents. Magnetic characterization is performed by SQUID and X-ray magnetic circular dichroism measurements at the rare earth M(4,5) edges. The characterization of the core-shell nanoparticles by means of these complementary techniques demonstrates that partial intermixing of core and shell materials takes place, and a significant fraction of europium is present in the divalent state which has significant influence on the magnetic properties. Hence, we obtained a combination of red emitting Eu(3+) ions and paramagnetic Gd(3+) ions, which may be highly valuable for potential future applications.