We report the synthesis of luminescent, free standing silicon quantum dots by dry and wet etching of silicon and silicon oxide core/shell nanostructures, which are synthesized by controlled oxidation of mechanically milled silicon. Dry and wet etching performed with CF(4) plasma and aqueous HF, respectively, result in the removal of the thick oxide shell of the core/shell nanostructures and affect an additional step of size reduction. HF etch is capable of producing isolated, spherical quantum dots of silicon with dimensions ∼ 2 nm. However, the etching processes introduce unsaturated bonds at the surface of the nanocrystals which are subsequently passivated by oxygen on exposure to ambient atmosphere. The photoluminescence spectra of the colloidal suspensions of these nanocrystals are characterized by double peaks and excitation dependent shift of emission energy. Comparison of the structural, absorption and luminescence characteristics of the samples provides evidence for two competing transition processes--quantum confinement induced widened band gap related transitions and oxide associated interface state mediated transitions. The results enable us to experimentally distinguish between the contributions of the two different transition mechanisms, which has hitherto been a challenging problem.