Praseodymium doped ZrO2 materials was prepared via sol-gel route and structurally characterized by X ray powder diffraction (XPD) technique as well as Rietveld refinements. The addition of the Gd3+ co-dopant gradually changes the zirconia structure from monoclinic to tetragonal, and then to cubic. Intensification of the Pr3+ luminescence was observed with the increasing Gd3+ co-dopant concentration. Emission spectra of the Zr0.99-xGdxPr0.01O2 materials show an initial strengthening of the red emission of Pr3+ (1D2→3H4 transition) with increasing Gd3+ co-doping. However, the luminescence is quenched at the highest Gd3+ concentration-possibly due to strongly increased concentration of the charge compensation defects. The valence change (PrIV→Pr3+) is supported by the XANES results on the LIII edge of Pr. Although predominantly in the Pr3+ form irrespective of the Gd3+ concentration, the contribution from PrIV is clearly visible at low (or zero) Gd3+ concentrations leading to the loss of Pr3+ and to poor luminescence output. Though enhancing the emission intensity of Pr3+, the defect clusters engender short Pr3+-Pr3+ distances, enhance the cross-relaxation process coupling the 3P0→1D2 relaxation with the 3H4→3H6 excitation. This process leads to the high red/blue-green emission ratio by quenching the 3P0→3H4 transition in blue-green. Eventually, the increased Gd3+ co-doping dilutes the Pr3+ ions and, the cross-relaxation process becoming non-operational; the quenching of the 3P0→3H4 transition is reversed.