Terbium(III) fluoride is primarily used in the production of specialty optical materials. It serves as a dopant in phosphors for fluorescent lamps and trichromatic lighting systems, where it emits green light under ultraviolet excitation. This property makes it valuable in display technologies, including cathode ray tubes and plasma display panels.

It is also employed in solid-state lasers and optical amplifiers, particularly in fiber optic communications, due to its efficient luminescence in the visible range. In addition, Terbium(III) fluoride is used in the fabrication of scintillation detectors for radiation measurement, where it helps convert high-energy particles into detectable light signals.

Its thermal and chemical stability make it suitable for use in high-temperature environments, such as in coatings for infrared optical components and in certain types of glass designed for laser applications.