Nanoparticles of Yb:Y2O3 have been synthesized by co-precipitation synthesis routes. The (NH4)2SO4 surfactant was added to Y(OH)3 precipitate during synthesis to control the size, morphology, agglomeration and phase of nanoparticles. The dried precipitates were calcined at 900 ◦C to obtain the desired cubic phase Yb:Y2O3 nano particles. In the present study we reported the effects of surfactant concentration on size, morphology, agglomeration and phase of Yb:Y2O3 nanoparticles. However the addition of surfactant is not enough to get nonagglomerated nanoparticles. The extracted precipitate should be washed in proper solvent to avoid formation of hard agglomerate during drying. Hence the effects of washing solvent (i.e. water and methanol) on agglomeration and transparency were also reported. The transparency of the sintered pellets, prepared by varying the surfactant concentration and washing solvent, was evaluated. A transparency of ∼ 80 % at 1500 nm was achieved in 1 mm thick Yb:Y2O3 ceramic pellet by optimization of the surfactant and washing solvent.