Bismuth ferrite (BiFeO3) multiferroic nanoparticles are synthesized using a low-temperature sol-gel auto-combustion technique. The phase purity is confirmed from X-ray diffraction (XRD) measurements and microstructural, electronic, and optical studies are correlated with the particle size of the bismuth ferrite nanostructured material. We demonstrated bandgap tunability from 2.22 to 1.93 eV with an average crystallite size from 42 to 24.42 nm following the inverse quantum confinement effect dominated by the lattice strain. The degenerate d-d electronic transitions 6A1g → 4T1g and 6A1g → 4T2g from iron dominate in these nanoparticles. The decrease in the energy band gap and the corresponding red shift in the d-d charge transfer transition energies with reduced average crystallite size are attributed to the increased lattice strain and reduced unit cell volume.