Selective nucleation of LiNbO3 nanocrystals on the steps was observed during the initial stage of LiNbO3 film growth in an alpha-Al2O3 (0001) substrate with a multiatomic step structure. In addition, stress stored in the nanocrystals as a result of the different thermal expansion coefficients of the film and the substrate caused band-gap widening. As the size of the nanocrystals decreased, the band gap shifted to a higher energy.