Doping of Nd distorts the lattice structure of CeO2, increases the lattice strain and expands the lattice. Oxygen vacancies and other ceria related defects contribute to the lattice strain. Shifting and broadening of the F-2g Raman peak of doped sample, compared to pure CeO2, is indicative of local structure distortion on doping. Dopant induced enhancement of oxygen vacancies, in the CeO2 lattice, is further confirmed by the generation of a new Raman peak at 543 cm(-1) that is otherwise absent in the pure one. UV-vis spectroscopy gives an understanding of the different types of f-f electronic transition of Nd in the crystalline environment of CeO2. Effective band gap of CeO2 reduces upto Nd concentration of 2.5%. The band gap, however, increases at 4% of Nd due to Burstein-Moss shift. Photoluminescence intensity of pure CeO2 decreases with Nd concentration owing to the increase in the number of non radiative oxygen vacancies. These vacancies act as luminescence quencher and reduce the emission intensity. Photoluminescence excitation spectra confirm the presence of these oxygen vacancies in the CeO2 nanocrystallites. (C) 2012 Elsevier B.V. All rights reserved.