The evolution of ferromagnetism has been investigated in thiol (2-mercaptoethanol) capped Mn doped CdS nanoparticles synthesized at various temperatures by sol-gel reverse micelle mechanism. X-ray diffraction measurements reveal a structural phase transformation from wurtzite to zinc blende structure with the increase in synthesis temperature of Mn doped nanocryatals. Magnetic measurements suggest that the antiferromagnetic interactions of Mn2+ ions within Mn—cluster in Mn doped CdS nanocrystals synthesized at lower temperature (∼17 °C) reduce the total magnetic moment at ambient temperature. Whereas the isolated Mn2+ ions in nanocrystals synthesized above 70 °C enhance the magnetic moment due to the sp-d exchange interaction at ambient temperature. It has been observed that the magnetic moments in all samples synthesized at various temperatures do not saturate even at lowest temperature, 5 K. The core diamagnetism in doped nanocrystals synthesized at low temperature (∼17 °C) is mostly due to the presence of magnetic ions around the surface, whereas these ions exist randomly throughout the crystal for samples synthesized at high temperature (∼70 °C), as a result core diamagnetism vanishes.