Rare earth doped nanocrystals have been recently suggested as useful materials for applications in quantum information processing. To reach optical properties closer to bulk crystals ones, it is still necessary to reduce the defects that can arise in nanoscale structures. Here, we probe the defects level by monitoring the inhomogeneous broadening of the 7 F 0  5 D 0 transition in particles of 0.3% Eu 3+ :Y 2 O 3. We find that lines as narrow as 14 GHz (0.015 nm), a value comparable to single crystals, can be obtained in 150 nm particles calcinated at 1200°C. The additional broadening observed for particles calcinated at lower temperature is attributed to defects inside crystallites and not to surface effects. A linear correlation is also observed between optical and Raman linewidths, suggesting that both processes are sensitive to the same defects. 5 D 0 excited state lifetimes are well described by a model based on an effective refractive index and we conclude that the defects causing the inhomogeneous broadening have no effect on the excited state population.