Nb2O5 quantum dots (QDs) were grown using a simple technique of vacuum thermal evaporation. QDs were found to be crystalline in nature by selected area electron diffraction (SAED) in TEM. Samples with thickness up to 20 nm did not show any significant residual strain. Residual stress effect on band gap of crystalline Nb2O5 was studied for films thicker than 20 nm. Residual strain was determined using SAED of the films with reference to powder X-ray diffraction (XRD). Films thicker than 45 nm become amorphous as analyzed by both SAED and XRD. The optical absorption of films in the range 25–60 nm indicates significantly varying optical band gap of films. The varying band gap with film thickness scales linearly very well with the variation of residual stress with film thickness. The residual stress dependence of band gap of crystalline films yields stress free band gap as 3.37 eV with pressure coefficient of band gap (∂Eg/∂P)T = −29.3 meV/GPa. From this study, the crystalline to amorphous transformation in tetragonal form of M-Nb2O5 has been determined to be at about 14 GPa. Both pressure coefficient of band gap and crystalline to amorphous transition for tetragonal M-Nb2O5 have been determined for the first time in the literature.