Highly monodisperse ZnO:Eu3+ nanocrystals have been synthesized by modified sol-gel method from ethanolic solutions. The effect of Eu 3+ ions (x=0.05-0.30) concentration on the structural, optical and luminescent properties has been evaluated. No other than the ZnO-wurtzite phase was observed at all dopant levels, which was confirmed by FT-IR and Raman spectroscopy techniques. A blue shift of the exciton peak and the increase on the corresponding band gap were observed at increasing Europium contents, which would indicate an interaction between Eu3+ ions and the development of the ZnO host structure. The luminescence properties were also dependent on Europium contents; a systematic blue shift and enhancement of the intensity of visible luminescence peak, attributed to an increment of surface defects, was observed by a rising Europium concentration. The red luminescence band, representing the 5D0→7F2 transition, was clearly observed in nanocrystals after annealing at 300°C for one hour. The presence of this band could be considered as an evidence of the effective energy transfer from ZnO to Eu3+ ions. © 2009 Materials Research Society.