This manuscript presents a study on the growth stress of Al 2 O 3 nanocrystals in Lu 2 O 3 matrix and its resultant effect on the optical properties of Al 2 O 3 nanocrystals. The high-resolution transmission electron microscopy study reveals the complete isolation of Al 2 O 3 nanocrystals embedded in Lu 2 O 3 matrix. Two dimensional finite element calculations clearly demonstrate that Al 2 O 3 nanocrystals certainly experience great compressive stress in Lu 2 O 3 matrix. This may lead to a great deal of defects formed around or inside Al 2 O 3 nanocrystals to relax the compressive stress incurred by Al 2 O 3 nanocrystals, leading to the photoluminescence emission observed.