Luminescent CdTe nanoparticles were synthesized in aqueous medium at low temperature under the inert atmosphere using water soluble precursors. Potassium tellurite was employed as the tellurium source for the synthesis. As synthesized CdTe nanoparticles were phase transferred into organic medium via partial ligand exchange method through long chain organic ligand 1-dodecanethiol in the presence of acetone. The phase transferred CdTe nanoparticles were blended homogeneously with P3HT polymer in a common solvent (chloroform) for possible application as the active layer in hybrid solar cell structure. The prepared blends were characterised with UV-Vis, Photoluminescence, SEM and AFM analysis. The XRD patterns of the particles in two phases confirm the uniformity of the cubic structure. The size distribution of the synthesized particles was confirmed through TEM analysis. The effective interactions of the donor and acceptor components were confirmed through UV-Visible spectroscopy. The efficient charge transfer processes of the blends were confirmed through photoluminescence analysis of the nanoparticles various volume additions with polymer. The morphological analysis of the blends was carried out using the Scanning Electron Microscopy which reveals the distribution of the nanoparticles in the polymer. AFM analysis of the coated blend film explores the phase separation of the nanoparticles when blended with the polymer in chloroform. Advantages of these nanoparticles for solar cell applications were discussed. (C) 2014 Elsevier Ltd. All rights reserved.