The preparation of transparent nanoceramics from nanocrystalline Y3Al5O12 (YAG) powders doped with rare-earth ions has been described and the results of investigation of the structure and morphology have been presented. Decomposition of YAG nanocrystals into YAlO3 (YAP) was observed. The temperature and pressure for the decomposition was much lower than that reported for larger crystals. The transformation was connected with grain coarsening. The influence of the method of preparation of the YAG nanopowders on the final transparency of the nanoceramic produced was determined. Preliminary results of the dependence of luminescence properties on the structural transformation of the nanograins are presented.