Due to the unique properties and wide array of applications of nanocrystalline materials based on titanium dioxide, the study of new synthesis approaches remains relevant. In this study, within the framework of the extraction-pyrolytic method (EPM), we suggest using the mixtures of Ti- and Eu-containing organic extracts based on valeric acid as precursors for fabrication of nanocrystalline TiO2-based powders with different Eu content: 0.5 mol%, 5 mol%, and 50 mol%. The thermal behavior of individual metal-containing extracts and their mixture was studied by thermogravimetric analysis and differential scanning calorimetry (TGA–DSC). To characterize phase composition and morphology of produced materials, the X-ray diffraction (XRD) method and scanning electron microscopy (SEM) were used. Photoluminescence properties of Eu3+ ions in TiO2 nanocrystals have been studied. Photocatalytic activity of produced materials was tested in the reaction of methylene blue (MB) oxidation under UV-VIS irradiation. Correlation between synthesis parameters (Eu content and pyrolysis temperature) and properties of produced materials (phase composition, photoluminescence and photocatalytic properties) has been studied. It was demonstrated that the presence of a Eu-containing extract in the precursor mixture increases the anatase-to-rutile phase transformation temperature. The highest efficiency (degradation degree of MB 96%) was shown by TiO2 powder consisting of mixed polymorphs, anatase (main phase) and rutile, with 0.5 mol% Eu additive. It was shown that anatase-to-rutile phase transformation in TiO2:Eu3+ nanoparticles manifests in a degradation of Eu3+ luminescence intensity.