High luminance Y3Al5O12:Ce3+ (YAG:Ce) nanoparticles were prepared from urea-added nitrate aqueous precursor by flame-assisted spray pyrolysis (FASP). The addition of urea into nitrate precursor plays an important role in YAG:Ce nanoparticle formation and in improving its optical performance. The decomposition and combustion of urea in the flame zone provides additional heat to the particles, which coupled with the evolution of large volumes of gasses, contributes to nanoparticle formation. The as-prepared nanoparticles are hexagonal YAlO3, that are nearly spherical, rough on the surface and dense—and they can be converted to YAG:Ce after being annealed at 1200 °C for 4 h. The heat-treated particles are single crystalline, smooth in surface and dense with an average size around 50 nm. The optimum cerium-doping concentration of YAG:Ce nanoparticles is 4.0 at.%, which exhibits quantum efficiency of 45.0%. This quantum efficiency is comparable with that of YAG:Ce nanoparticles produced from other processes. The efficient emission of YAG:Ce nanoparticles also originates from a relatively good distribution of Ce ions incorporated into the host material of YAG as evidenced from the elemental mapping analysis.