We developed a procedure to prepare luminescent LiYF₄:Yb/LiYF₄ and LiYF₄:Yb,Er/LiYF₄ core/shell nanocrystals with a size of approximately 40 nm revealing luminescence decay times of the dopant ions that approach those of high-quality laser crystals of LiYF₄:Yb (Yb:YLF) and LiYF₄:Yb,Er (Yb,Er:YLF) with identical doping concentrations. As the luminescence decay times of Yb³⁺ and Er³⁺ are known to be very sensitive to the presence of quenchers, the long decay times of the core/shell nanocrystals indicate a very low number of defects in the core particles and at the core/shell interfaces. This improvement in the performance was achieved by introducing two important modifications in the commonly used oleic acid based synthesis. First, the shell was prepared via a newly developed method characterized by a very low nucleation rate for particles of pure LiYF₄ shell material. Second, anhydrous acetates were used as precursors and additional drying steps were applied to reduce the incorporation of OH⁻ in the crystal lattice, known to quench the emission of Yb³⁺ ions. Excitation power density (P)-dependent absolute measurements of the upconversion luminescence quantum yield (Φ_UC) of LiYF₄:Yb,Er/LiYF₄ core/shell particles reveal a maximum value of 1.25% at P of 180 W·cm⁻². Although lower than the values reported for NaYF₄:18%Yb,2%Er core/shell nanocrystals with comparable sizes, these Φ_UC values are the highest reported so far for LiYF₄:18%Yb,2%Er/LiYF₄ nanocrystals without additional dopants. Further improvements may nevertheless be possible by optimizing the dopant concentrations in the LiYF₄ nanocrystals.