Germanium (Ge) nanoparticles have attracted a lot of attention due to their excellent optical properties. In this paper, we report on the formation of Ge nanoparticles embedded in GeO2 matrix prepared by electron beam evaporation and subsequent annealing. Transmission electron microscopy (TEM) studies clearly indicate the formation of Ge nanocrystals in the films annealed at 500 degrees C. Fourier transform infrared (FTIR) spectroscopic studies are carried out to verify the evolution of the structure after annealing at each stage. Micro-Raman analysis also confirms the formation of Ge nanoparticles in the annealed films. Development of Ge nanoparticles is also established by photoluminescence (PL) analysis. Surface morphology study is carried out by atomic force microscopy (AFM). It shows the evolution of granular structure of the films with increasing annealing temperature.