Nanocrystal powders of Y2O3:Tb with different Tb3+ doping concentrations and average sizes were prepared by chemical self-combustion, and the bulk samples of corresponding concentrations were also obtained by annealing nano-materials at high temperatures. The emission spectra, excitation spectrum, X-ray diffraction, transmission electron microscopy images and fluorescence decay curves of Y2O3:Tb nanomaterials and bulk materials were measured. Then the 4f8 →4f75d1 transition of Tb3+ ions in Y2O3:Tb nanocrystal powders was studied. Great difference in the excitation spectral line shapes for different sized Y2O3:Tb nanocrystal powders was observed. The change of excitation spectral line shapes is because that the Tb3+ ions exist in two very different local environments——the low crystallization degree of close surface and high crystallization degree inside the particles. The absorption peaks of 4f5d transition are different in these two environments. Also the 5D3→5D4 and 5D4→5D4 energy transfer and luminescence concentration quenching caused by energy transfer were investigated. The (5D3, 7F6) →(5D4, 7F0) energy transfer is caused by interaction of electric dipoles, which is greatly affected by the quantum confinement effect. The concentration quenching of 5D4→7F5 luminescence is resulted by the energy transfer of exchange interaction among 5D4 (Tb) energy levels of different Tb3+ ions. The quantum confinement showed little influence on this type of energy transfer.