We synthesize water-dispersible Nd3+:KYF4 nanoparticles with narrow size distribution by microwave-hydrothermal crystallization of freshly precipitated gels using the Emuksol-268 poloxamer as a surfactant. We detect the Nd3+ fluorescence in the material in the near-infrared spectral range, which is, however, partially quenched. We detect two types of optical sites and study the one with the higher energy of optical transitions. We obtain its kinetics of impurity quenching, which is attributed to Förster static quenching on –OH acceptors in the case of the low Nd3+ concentration of 0.1 at.%. In the case of the higher Nd3+ concentration of 1 at.% we observe similar Förster-like kinetics with a higher decrement. Taking into account that the microparameter of energy migration Nd Nd Cdd is significantly higher that the microparameter of energy transfer Nd OH Cda we conclude that the Förster-like stage for the higher dopant concentrations is determined by hopping energy migration over the Nd3+ donors to –OH acceptors, and can therefore be described as the fluctuation kinetics. We estimate the values of the energy transfer microparameters which suggest that the level of impurity quenching for the Nd3+ doped fluoride nanoparticles is significantly lower than that for the previously reported phosphate nanoparticles with the same dopant. The fundamental reason is that the spontaneous emission lifetime τR is approximately six times longer in the case of fluoride nanoparticles. The results of energy transfer probing reveal that the –OH acceptors are distributed in the volume of the material (presumably in the mesopores of the nanoparticles) rather than on its surface, which is confirmed by lower fluorescence quenching in the Nd3+:KYF4 synthesized in D2O.