The fabrication of Gd2O3-MgO nanocomposite optical ceramics via hot-pressing using sol-gel derived cubic-Gd2O3 and MgO nanopowders was investigated. The precursor powder calcined at 600 degrees C had an average particle size of 12nm. The effects of hot-pressing temperature on constituent phases, microstructure, mid-infrared transmittance, and microhardness were studied. The crystallographic modifications of Gd2O3 phase varied with the increase in sintering temperature from 1250 to 1350 degrees C. The monoclinic-Gd2O3 phase was retained for the composite sintered at 1350 degrees C and the sample had an average grain size of 90nm, excellent transmission (80.4%-84.8%) over 3-6m wavelength range, and enhanced hardness value of 14.1GPa.