During recent decades, magnetic and semiconductor nanoparticles have attracted significant attention of scientists in various fields of engineering, physics, chemistry, biology and medicine. Fe3+ doped PVA capped CdTe nanoparticles were prepared by co-precipitation method and characterized by powder X-ray diffraction, SEM, TEM, FT-IR, optical, EPR and PL techniques to collect the information about the crystal structure, coordination/local site symmetry of doped Fe3+ ions in the host lattice and the luminescent properties of prepared sample. Powder XRD data revealed that the crystal structure belongs to a cubic system and its lattice cell parameters were evaluated. The average crystallite size was estimated to be 8 nm. The morphology of prepared samples was analyzed by using SEM and TEM investigations. Functional groups of the prepared sample were observed in FT-IR spectra. Optical absorption and EPR studies have shown that on doping, Fe3+ ions enter the host lattice in octahedral site symmetry. PL studies of Fe3+ doped PVA capped CdTe nanoparticles revealed UV and blue emission bands. CIE chromaticity coordinates were also calculated from the emission spectrum of Fe3+ doped PVA capped CdTe nanoparticles.