Er3+ doped SrMoO4 nanostructures with various concentration of Er3+ have been synthesized by chemical precipitation method. The as prepared nanostructures were characterized by X-ray diffraction (XRD), Raman, Fourier transform infrared (FTIR), UV-Visible spectroscopy, Vibrating sample magnetometer (VSM) and Transmission Electron microscopy (TEM). XRD analysis confirmed that the particles crystallize in a scheelite-type tetragonal structure. The particle sizes were found to be 20-40 nm as calculated from TEM. VSM measurements have revealed the ferromagnetic nature of the nanostructures. The third order nonlinear optical behavior was studied by a Z-scan technique using a diode pumped continuous wave Nd:YAG laser at 532 nm. Open and closed aperture results reveal that the observed nonlinearity of the nanostructures is attributed to reverse saturable absorption and self-defocusing nature. The calculated nonlinear component of refractive index, absorption coefficient and magnitude of nonlinear susceptibility were found to be in the order of 10(-9) (cm(2)/W), 10(-4) (cm/W) and 10(-6) esu, respectively.