The photoluminescence (PL) properties of Y203 :Eu^3+ nanophosphors were systematically investigated with the goal of improving the color quality and quantum efficiency of Y2O3 :Eu^3+ nanophosphors for potential applications in nano-scale devices. The emission spectra, excitation spectra and fluorescence decay curves were employed to trace the energy transfer process from Eu^3+ at C3i site to Eu^3+ at C2 site. The experimental results show that the energy transfer process becomes more and more efficient with the increase in the Eu^3+ concentration. The emission of Eu^3+ at C2 site is favorable because it has high radiative efficiency and better color quality. The successful suppress of the emission Eu^3+ at C3i is especially important for its applications in general illumination or display technology. The quantum efficiency and color quality of Y203 :Eu^3+ can be improved by controlling the energy transfer between the Eu^3+ at S6 site and Eu^3+ at C2 site.