In this paper we report on the optical and structural properties of CdTe nanoparticles embedded in silica matrix grown by the radio‐frequency (RF) magnetron sputtering technique with subsequent annealing in vacuum. Optical transmittance, Raman scattering, X‐ray photoelectron spectroscopy (XPS), grazing incidence X‐ray diffraction (GIXRD) and photoluminescence (PL) were used to study the grown samples. GIXRD shows the presence of the cubic phase of CdTe nanocrystals (NCs) in the silica matrix, with size ranging from 2.5 nm to 10.5 nm. Raman spectroscopy illustrates features linked to LO phonons in the CdTe structure. The absorption spectra of annealed samples demonstrate shoulders on the absorption in the range 650–700 nm, in agreement with the PL emission observed at 650–725 nm. However, the blue shift observed in the NCs bandgap in relationship with their size was below the expected level. We attribute this feature to the graded interface between the NCs and the matrix, which causes a weak confinement of carriers in CdTe NCs. (© 2008 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)