Cadmium sulfide semiconductor nanoparticles along with terbium ions were incorporated in silica xerogels through sol–gel route. The optical absorption and emission spectra confirmed the formation of CdS nanoparticles along with terbium ions in the silica gel. The optical bandgap and size of the CdS nanoparticle were calculated from the absorption spectrum. The TEM measurement was also used to evaluate the average size of the CdS nanoparticles. The fluorescence spectra reveal that the intensity of characteristic emission of terbium ions increases considerably in the presence of CdS nanoparticles even in the gel stage itself and this avoids the need of heating gels at high temperatures. The branching ratios were calculated from the emission spectra using the standard procedure.