Co2+:MgAl2O4 nanocrystals embedded in SiO2-based glass have been prepared by heating the gels of composition 5MgO–6Al2O3–89SiO2–xCoO (x=0.2, 0.4, 0.6, 1.0) (mol%). When the gel samples were heated up to 1000 °C, MgAl2O4 nanocrystals were precipitated and Co2+ ions were located in the tetrahedral sites in MgAl2O4 nanocrystals. X-ray diffraction analysis shows that the diameter of MgAl2O4 crystal is ∼5–15 nm. Absorption and emission bands in the visible and near infrared regions have been observed from transparent Co2+:MgAl2O4/SiO2 nanocomposites. The observed absorption and emission spectra are characteristic of tetrahedral Co2+ in crystals. The intensity of absorption bands increases with the increasing of heat-treatment temperature and Co2+ concentration, while with the increasing of Co2+ concentration, the fluorescence intensity decreases and the fluorescence spectra in the visible range show a red shift. The crystal field parameter Dq of 405 cm−1 and the Racah parameters B of 752 m−1 and C of 3388 cm−1 were calculated for tetrahedral Co2+ ions.