ZrO2:Yb3+ nanocrystalline phosphors with high concentrations of ytterbium ions were prepared using the sol-gel method. X-ray diffraction, high-angle annular-dark-field scanning transmission electron microscopy (HAADF-STEM), energy dispersive X-ray spectroscopy, and high-resolution transmission electron microscopy (HRTEM) were used to characterize the nanocrystalline phosphors annealed at 1000 degrees C. Unit-cell distortion and changes in the crystalline structure of the monoclinic zirconia to tetragonal zirconia, and subsequently cubic zirconia, were observed with increased Yb concentration. Yb ions were randomly distributed into the lattice of the crystalline structure. No segregation of Yb2O3 phase was observed. The substitution of Zr atoms by Yb atoms on different crystalline phases was confirmed by the experimental results and theoretical simulations of HRTEM and HAADF-STEM.