Y3+ doped CeO2 nanopowders (Ce0.9Y 0.1O1.95, abbreviated as YDC) were synthesized by citrate-nitrate-auto combustion process using cerium nitrate hexahydrate, yttrium nitrate hexahydrate and citric acid. The as-synthesized powders were calcined at 700°C and converted into dense bodies followed by sintering at 1200°C. The microstructure of the synthesized powders and sintered bodies were examined by scanning electron microscopy (SEM). The surface morphology of the nanoparticles and clusters were also analysed by transmission electron microscopy (TEM). The particles size of the YDC was found to be in the range from 10 to 30 nm, which is in good agreement with the crystallite size calculated from X-ray peak broadening method. Also, the X-ray diffraction confirmed that the Ce0.9Y0.1O1.95 crystallizes as the cubic fluorite structure of pure ceria. The optical absorption by functional molecules, impurities and oxygen vacancies were analysed by FTIR and Raman spectroscopic studies. From the FTIR spectrum, the absorption peak found at 530 cm-1 is attributed to the vibrations of metal-oxygen bonds. The characteristic Raman peak was found to be 468 cm-1, and the minute absorption of oxygen vacancies were observed in the region 500-640 cm-1.