We report on a high-resolution optical and magneto-optical spectroscopy, luminescence, and electron paramagnetic resonance (EPR) studies of yttrium orthophosphate single crystals doped with erbium, which are promising telecom-wavelength materials for applications in quantum electronics and quantum information processing. An observation of the hyperfine structure in optical spectra of 167Er isotope in Er:YPO4 is presented. Energies and symmetries of 40 crystal-field levels of Er3+ in Er:YPO4 and g factors of some of them were determined and successfully modeled on the basis of crystal-field calculations. The obtained set of crystal-field parameters was used in modeling the hyperfine structure observed in the optical and EPR spectra of Er:YPO4 single crystals.