Vanadium dioxide (VO2) is a highly attractive and multifunctional material for technological applications due to its metal–insulator transition, which is accompanied by several orders of magnitude changes in electrical resistivity and optical transmissivity. In this work, we report on the metal–insulator transition of VO2 nanoparticles which are produced by a simple, efficient, and low-cost two-step preparation method based on infrared laser irradiation of V2O5 powder dispersed in water and subsequent stoichiometric stabilization by vacuum annealing at 773 K. VO2 nanoparticles have an average size of 36 nm with facet-like contours and undergo a structural phase transition from a monoclinic to a tetragonal phase, accompanied by a metal–insulator transition occurring around 323 K, which is about 17 K lower than bulk VO2. No evidence of the formation of intermediary metastable phases is observed. Our findings reveal that the size of VO2 nanoparticles is a key parameter to moving the transition closer to room temperature, which is important for many applications.