Nanomaterials have fascinated researchers in recent years because these materials exhibit unusual optical, magnetic and electrical properties as compared to their bulk counterparts. Incorporating impurity ions into a semiconducting host to extend its properties has been one of the most important techniques that paved the way for the modern technology based on spintronic devices. Over the past few years, oxide based dilute magnetic semiconductors (DMSs) have gained remarkable interest due to the possibility of inducing room temperature ferromagnetism. This review describes the experimental developments and optical properties of oxide based DMSs, including the recent results on ZnO, CdO and In2O3 based systems. Optical properties of transition metal (TM)-doped ZnO, CdO and In2O3 dilute magnetic semiconductor nanoparticles show red shift in energy band gaps. Such types of phenomena are attributed to sp-d exchange interactions between band electrons and localized d-electrons of the substituted transition metal ions. Table of Contents