Novel Er3+-doped transparent NaYb2F7 glass-ceramics (GCs) were successfully fabricated for the first time by a conventional melt-quenching technique with subsequent heat treatment. The formation of NaYb2F7 nanocrystals (NCs) was confirmed by X-ray diffraction (XRD), transmission electron microscopy (TEM), high-resolution TEM (HRTEM), selected-area electron diffraction (SAED), and photoluminescence emission spectra. Moreover, the appearance of Stark level splitting of Er3+ emission bands and the variation of the decay curves demonstrate the accumulation of active centers into the NaYb2F7 NCs lattice. Hence, the photoluminescence emission intensities of Er3+ doped GC680 are greatly enhanced relative to those in precursor glass. Furthermore, the temperature dependent fluorescence intensity ratio (FIR) of thermally coupled emitting states (4S3/2, 2H11/2) in Er3+ doped GCs was studied under 980 nm laser excitation with a very low power density of 13 mW mm−2 to avoid the possible laser induced heating. A high temperature sensitivity of FIR of 1.36% K−1 is obtained at 300 K and the corresponding effective energy difference (ΔE) is 852 cm−1. Besides, laser induced heating at several excitation power densities was measured to evaluate the laser induced heating effect and the accuracy of temperature sensing for our sample. The GCs with relatively high sensitivity under low excitation power density are promising for temperature sensing. Moreover, the study on down-conversion (DC) spectra of the GC samples shows their ability to convert a high energy photon into two low energy photons, implying that they may also have important application as DC materials.