Rare-earth-doped upconversion nanoparticles have attracted considerable attention because of their stable, narrowband, and multi-color luminescence, which features less crosstalk, photo-blinking, and photo-bleaching compared with quantum dots and organic dyes. However, rare-earth ions exhibit long luminescence decay times (ranging from microseconds to milliseconds), low quantum efficiency, weak luminescence intensity, and nondirectional far-field emission, restricting their application in time-dependent nanophotonic devices. Optical fields and electron excitations are coupled in plasmonic nanocavities, which is beneficial for significantly shortening the luminescence decay time, improving the quantum efficiency, enhancing the upconversion luminosity efficiency, and effectively controlling the emission direction. The paper reviews recent progress in nanocavity modulation of rare-earth ion luminescence, with a focus on the work of nanocavity modulation of rare-earth ions to achieve sub-50-ns ultrafast upconversion luminescence, and prospects for its applications in single-photon sources, quantum communication devices, and nanolasers.