Rare-earth-doped nanoparticles are promising materials for fluorescent labeling, as they are characterized by a high Stokes shift, narrow emission spectra, long lifetimes, minimized photobleaching, and low toxicity. We examined the structural and optical properties of europium-doped gadolinium oxide nanoparticles synthesized by the flame pyrolysis method, with specific emphasis on full spectral characterization and fluorescence kinetics. The emission-excitation characterization revealed the presence of predominantly monoclinic but also highly luminescent cubic phases with a prominent oxygen-to-europium charge-transfer band in the 230-260 nm range. A broad emission band in the visible region, corresponding to a similar band in undoped Gd2O3, related to the matrix surface defects, was observed in time-gated spectroscopy of doped nanopowders. All of the examined nanopowders showed very short decay components, on the order of 2 ns, and much longer millisecond decay times characteristic of lanthanide ions. At intermediate times, on the order of 20-100 ns, a complex behavior of the decay was observed, indicative of progressive energy transfer to the lanthanide ion, which varied with different intrashell transitions. Structural characterization data by means of XRD measurements allowed for unambiguous determination of the Eu:Gd2O3 crystallographic structure and cell dimensions to be consistent with a predominantly monoclinic phase.