Ferroelectric BaTiO₃ became a multifunctional material via doping of lanthanide ions (0.3 mol% Er³⁺/3.0 mol% Yb³⁺) and subsequently upconversion luminescence was enhanced by incorporation of Zn²⁺ ions. Upconversion luminescence of BaTiO₃:Er³⁺/Yb³⁺ perovskite nanophosphor has been studied using 800 and 980 nm laser excitations. The emission dynamics is studied with respect to its dependence on input power and external temperature including lifetime. Based on time-resolved spectroscopy, it is inferred that two types of Er³⁺ sites are present in the barium titanate lattice. The first one is a short lived component (minor species) present at 6-coordinated Ti-sites of low symmetry while the second one is a long lived component (major species), present at 12-coordinated Ba-sites with high symmetry. The influence of the introduction of Zn²⁺ ions on the lifetime of ⁴S_3/2 and ⁴F_9/2 levels of Er³⁺ ions is also investigated. Enhanced temperature sensing performance (120 K to 505 K) of the material is observed using the fluorescence intensity ratio technique, employing the emission from the thermally coupled, ²H_11/2 and ⁴S_3/2 energy levels of Er³⁺ ions. The defect luminescence of the material is also found to increase upon Zn-doping.