Nanocrystalline ZrO2-Al2O3∶Er3+ luminescence powders are prepared by co-precipitation method. The room temperature sharp characteristics emissions of Er3+ ions are observed, in which green light at 547, 560 nm is the strongest. There exists the energy transfer between the matrix and rare earth ions Er3+. Samples with different sintering temperature are studied. The results show the samples with different sintering temperature display different crystalline phase. The up-conversion luminescence of nanocrystalline ZrO2-Al2O3∶Er3+ and ZrO2-Al2O3∶ Er3+/ Yb3+ are studied and the transition mechanism of the up-conversion are discussed. It is found that the red and green emissions of ZrO2-Al2O3∶Er3+ are two-photon process. In the up-conversion spectrum of ZrO2-Al2O3∶ Er3+ / Yb3+ the red and green emissions are also two-photon process, but very weak blue emission is the three-photon process. Concentration quenching of the ions Er3+ is discussed. The most appropriate doping concentration is 2%(Er3+/ Zr+4).