Herein, we report the synthesis of ferric oxide embedded low melting phosphate glass nanocomposite and also the effect of ferric oxide nanoparticles content on the optical and magneto-optical properties of the glasses. The optical study clearly showed red shift in optical cut off with increasing ferric oxide concentration. The band gap of the host glass was observed to be 3.48eV and it shifted to 3.14eV after doping with ferric oxide. The glasses doped with 0.25 and 2% ferric oxide showed particle size of 4–6nm and 8–12nm, respectively. Faraday rotation of the glass nanocomposites was measured and showed variation in the Verdet constant as per increasing concentration of ferric oxide. Interestingly, the host glass itself showed fairly good Verdet constant (11.5°/Tcm) and threefold enhancement was observed in the Verdet constant of ferric oxide quantum dot-glass nanocomposite.