The invention discloses rare earth element-doped bismuth layer-structured multifunctional materials and a preparation method thereof. The general chemical formula of the multifunctional materials is Bi(3-x-y-z)ErxYbyRzTi(1.5-0.5x1)W(0.5-0.5x1-x2)Mx1Mox2Ox3, wherein x is more than 0 and not more than 40 mol%, y is not less than 0, z is not less than 0 and not more than 40 mol%, x1 and x2 are more than 0 and not more than 30 mol%, x3 is not less than 8 and not more than 10, R is one or more of La, Li, Ce, Pr and Y, and M is one or more of Nb, Ta, Zr, Hf, Cr and Mn. The multifunctional materials prepared in the invention have the advantages of good ferroelectric/piezoelectric properties, high Curie point, high high-temperature thermal stability, high chemical durability, excellent up-conversion luminescence performance, excellent optical temperature sensing performance, high sensitivity and wide application temperature range, and has wide application prospects in the fields of optical temperature sensor, bio-molecular fluorescence labeling, infrared detection and anti-fake, luminescence displays and photoelectric integration.