Excitonic quasiparticles and their interactions with phonons, magnons, and charge carriers may play a pivotal role in governing the optical properties and their correlation with magnetic interactions in two-dimensional (2D) magnetic semiconductors. Further, in transition-metal compounds, d–d electronic transitions, arising from excitations between crystal-field-split d orbitals, significantly influence the optical and magnetic properties, particularly in strongly correlated and low-dimensional systems. Fe₂P₂S6, a layered antiferromagnetic semiconductor, offers a rich platform for studying the interplay between spin, charge, and lattice degrees of freedom in these 2D systems. In this work, we investigate the photoluminescence (PL) properties of Fe₂P₂S₆ to probe exciton dynamics, intra-atomic transitions, and their temperature evolution. Two prominent d–d emission peaks are observed at ∼1.63 eV (D1) and ∼1.80 eV (D2), attributed to the crystal-field-split Fe²⁺ states. An excitonic emission near the band edge is also identified, which exhibits a characteristic Fano asymmetric line shape. This asymmetry is attributed to the quantum interference between the discrete excitonic state and the d–d transition induced continuum (D2), revealing a Fano resonance behaviour. This exciton peak disappears well before the Néel temperature, indicating its faster destabilisation than magnetic ordering. Temperature-dependent PL measurements show a quenching of the excitonic peak with increasing temperature. Our findings provide detailed insight into the optical excitation pathways in Fe₂P₂S₆.