Eu3+ (8 mol%) activated gadolinium oxide nanorods have been prepared by hydrothermal method without and with surfactant, cityl trimethyl ammonium bromide (CTAB). Powder X-ray diffraction (PXRD) studies reveal that the as-formed product is in hexagonal Gd(OH)3:Eu phase and subsequent heat treatment at 350 and 600 °C transforms the sample to monoclinic GdOOH:Eu and cubic Gd2O3:Eu phases, respectively. The structural data and refinement parameters for cubic Gd2O3:Eu nanorods were calculated by the Rietveld refinement. SEM and TEM micrographs show that as-obtained Gd(OH)3:Eu consists of uniform nanorods in high yield with uniform diameters of about 15 nm and lengths of about 50-150 nm. The temperature dependent morphological evolution of Gd2O3:Eu without and with CTAB surfactant was studied. FTIR studies reveal that CTAB surfactant plays an important role in converting cubic Gd2O3:Eu to hexagonal Gd(OH)3:Eu. The strong and intense Raman peak at 489 cm-1 has been assigned to Ag mode, which is attributed to the hexagonal phase of Gd2O3. The peak at ∼360 cm-1 has been assigned to the combination of Fg and Eg modes, which is mainly attributed to the cubic Gd2O3 phase. The shift in frequency and broadening of the Raman modes have been attributed to the decrease in crystallite dimension to the nanometer scale as a result of phonon confinement.