Gd₂O₃ nanostructures were synthesized by hydrothermal method with five different reaction conditions (reaction temperatures: 130 °C, 180 °C and 230 °C and pH: 8, 10 and 13) and the effect on morphology of the Gd₂O₃ nanostructures is studied. Scanning electron microscopy results reveal that the morphology and the dimension of the nanostructures change with different preparation conditions and it ranges from thick ellipsoids to fine long nanorods. Fine long perfect nanorods are formed when the reaction temperature is 230 °C and pH is 8. Diffraction studies confirm that the crystal structure of the Gd₂O₃ samples is cubic. The change in the optical band gap of the Gd₂O₃ sample is consistent with the change in the dimension of the nanostructure. The quantum yield of Gd₂O₃ samples (2.74% to 6.84%) is found to be larger than the values reported for Gd₂O₃ samples with dimensions in quantum confinement range and in submicron range.