The structure, luminescence spectroscopy, and lifetime decay dynamics of Eu2O3 nanoparticles formed in MCM-41 have been investigated. Both X-ray diffraction and high-resolution transmission electron microscopic observations indicate that Eu2O3 nanoparticles of monoclinic structure are formed inside channels of MCM-41 by heating at 140 degreesC. However, heat treatment at 600 or 700 degreesC causes migration of Eu2O3 from the MCM-41 channels, forming nanoparticles of cubic structure outside the MCM-41 channels. After heating to 900 degreesC, some of the cubic Eu2O3 particles change to monoclinic Eu2O3, and the MCM-41 structure breaks down and a different or disordered phase is formed. The feature of the hypersensitive D-5(0) --> F-7(2) emission profile of Eu3+ is used to follow the structural changes. In the luminescence spectrum of the sample prepared at 140 degreesC, the emission spectrum is dominated by peaks at 615 and 623 nm, while in the other samples a peak at 612 nm is prevalent. Photoluminescence lifetimes show the existence of short (<1 mus) and long (microsecond to millisecond) components for each sample. The fast decay is attributed to quenching by surface states of the nanoparticles or energy transfer to the MCM-41, while the longer time decays show the effects of concentration quenching. The monoclinic sample prepared at 140 degreesC shows a higher luminescence intensity than the cubic samples or the bulk powder. These observations indicate that MCM-41 as a template can be used for making and stabilizing monoclinic rare earth oxides, which normally are stable only at high temperatures and high pressures. More importantly, the nanophase Eu2O3/MCM-41 composite materials formed at low temperatures might represent a new type of efficient luminescence material with fast response, with potential applications in lighting and displays.