Tailoring of the refractive index of optical thin films has been a very fascinating as well as challenging topic for developing new generation optical coatings. In the present work a novel Gd2O3/SiO2 composite system has been experimented and probed for its superior optical properties through phase modulated spectroscopic ellipsometry, spectrophotometry and atomic force microscopy. The optical parameters of the composite films have been evaluated using Tauc-Lorentz (TL) formulations. In order to derive the growth dependent refractive index profiles, each sample film has been modeled as an appropriate multilayer structure where each sub-layer was treated with the above TL parameterizations. All codeposited films demonstrated superiority with respect to the band gap and morphological measurements. At lower silica mixing compositions such as in 10-20% level, the composite films depicted superior spectral refractive index profile, band gap as well as the morphology. This aspect highlighted the fact that microstructural densifications in composite films can override the chemical compositions while deciding the refractive index and optical properties in such thin films. (c) 2006 Elsevier B.V. All rights reserved.