Hexagonal BiPO4.xH2O and Bi0.95Eu0.05PO4.xH2O nanoparticles were synthesized by a polyol- mediated method employing diethylene glycol. The powder X-ray diffraction revealed the phase purity and isostructural nature of both undoped and Eu3+-doped BiPO4 . The monoclinic Bi0.95Eu0.05PO4 was obtained by heating the hexagonal Bi0.95Eu0.05PO4.xH2O at 600 C. The microscopical characterization revealed the formation of nanocrystalline materials. Water molecules present in the bismuth precursor favoured the formation of hexagonal phase at low temperature. The role of DEG molecules in arresting the particle growth during the phase transformation of Bi0.95Eu0.05PO4 from hexagonal to monoclinic was observed. The synthesized materials were characterized using different spectroscopic techniques such as FT-IR, Raman,31P MAS-NMR,DRUV-Vis and PL. The difference in the crystal structures and symmetries is clearly reflected in the spectral results of hexagonal and monoclinic Bi0.95Eu0.05PO4. The structure-property relations were studied to derive its importance from both fundamental and technological aspects.