Due to its high quantum efficiency (QE) for luminescence, conventional coarse-grained YAG:Ce (Y3Al5O12:Ce) finds widespread use in light conversion and scintillator applications. Nanocrystalline YAG:Ce may possess modified optical properties which are advantageous for technological applications, but this will depend on highly efficient energy conversion. In this work, the effect of the particle size and Ce concentration on the quantum efficiency and the optical lifetime of the YAG:Ce emission will be characterized and discussed. Nanocrystalline YAG:Ce with an average particle size of 20 to 50 nm was synthesized by the chemical vapour reaction (CVR) method and subsequently analyzed using various techniques. When comparing the nanocrystalline samples to a coarse-grained reference sample, the particle size and doping concentration was found to have a significant influence on quantum efficiency. It was established that the nanocrystalline samples investigated exhibit a lower QE at ambient temperature than the coarse-grained reference. The results of the optical lifetime measurements are discussed in relation to this reduction in QE.