Partial cation substitution can significantly change the physical properties of parent compounds. By controlling the chemical composition and knowing the mutual relationship between composition and physical properties, it is possible to tailor the properties of materials to those that are superior for desired technological application. Using the polyol synthesis procedure, a series of yttrium-substituted iron oxide nanoconstructs, γ-Fe2−xYxO3 (YIONs), was prepared. It was found that Y3+ could substitute Fe3+ in the crystal structures of maghemite (γ-Fe2O3) up to a limited concentration of ~1.5% (γ-Fe1.969Y0.031O3). Analysis of TEM micrographs showed that crystallites or particles were aggregated in flower-like structures with diameters from 53.7 ± 6.2 nm to 97.3 ± 37.0 nm, depending on yttrium concentration. To be investigated for potential applications as magnetic hyperthermia agents, YIONs were tested twice: their heating efficiency was tested and their toxicity was investigated. The Specific Absorption Rate (SAR) values were in the range of 32.6 W/g to 513 W/g and significantly decreased with increased yttrium concentration in the samples. Intrinsic loss power (ILP) for γ-Fe2O3 and γ-Fe1.995Y0.005O3 were ~8–9 nH·m2/Kg, which pointed to their excellent heating efficiency. IC50 values of investigated samples against cancer (HeLa) and normal (MRC-5) cells decreased with increased yttrium concentration and were higher than ~300 μg/mL. The samples of γ-Fe2−xYxO3 did not show a genotoxic effect. The results of toxicity studies show that YIONs are suitable for further in vitro/in vivo studies toward to their potential medical applications, while results of heat generation point to their potential use in magnetic hyperthermia cancer treatment or use as self-heating systems for other technological applications such as catalysis.