This paper reports the preparation and fluorescence characteristics of erbium (III) oxide nanocrystals, The erbium oxide phosphors were synthesized through a microemulsion technique. Transmission electron microscopy and X-ray diffraction were used to characterize the phosphor nanoparticles and reveals a nanocrystal structure and the size in the range from 5 to 30 nm in diameter. A room-temperature photoluminescence was observed at 1.54 mum with a full width at half-maximum (FWHM) of 22 nm due to intra-atomic transitions (I-4(13/2) --> I-4(15/2)) levels in the erbium (III) ions. It was also observed that the shape and the FWHM of the photoluminescence signals from the composite film prepared by embedding the nanocrystals into titania/organically modified silane composite matrix are quite similar to those from the nanocrystal, but its peak position shifted from 1.540 mum to 1.531 mum.