Water dispersible SiO2@F-4:Yb/Er double-shell (referred as partly etched; upconversion exterior shell with underneath silica interior shell) capsules and NaYF4:Yb/Er (referred as fully etched) capsules with well-defined morphology are fabricated through a facile hydrothermal process. These capsules are envisioned for biomedical applications such as photoluminescence imaging and drug delivery. Sacrificial silica template particles are first coated with a Y(OH)CO3:Yb/Er shell using an urea precipitation method and resulting composites are converted to capsular structure by incubating with sodium fluoride (NaF). A possible mechanism of the porous shell formation of NaYF4:Yb/Er and simultaneous etching of silica template is explained in terms of ion exchange reaction and surface protected etching. It is found that the ratio of NaF to initial rare-earth-precursor plays a critical role to obtain the partly etched and fully etched capsules. These capsules exhibit luminescence properties as evaluated by upconversion (UC) characterization, which is of prime importance for biomedical imaging, making them suitable for theranostic applications. (C) 2015 Elsevier B.V. All rights reserved.