The goals of this study lie in the endeavour to synthesise terbium oxide powders, calculation of the average crystallite size, lattice parameter, lattice strain and dislocation density by using X-ray diffraction peak broadenings and, particularly, examination of the effects of precursor molarity on morphology, microstructural parameters and crystal imperfections. The X-ray diffraction patterns demonstrated that the powders had pure cubic bixbyite body-centred phase with high crystallinity. The crystallite size values varied between 21.05 and 31.45 nm depending on both precursor molarity and four different calculation methods, i.e. Debye-Scherrer, modified Debye-Scherrer, Williamson-Hall and Halder-Wagner methods. It was found that regardless of the calculation method, there was a positive relationship between the average crystallite size values and the precursor molarity, and it was concluded that the crystallinity was improved. The lattice strain values calculated by both the Williamson-Hall analysis integrated with the uniform deformation model and the Halder-Wagner methods showed that the tensile stress in the structure became more effective with increasing precursor molarity. The lattice strain values calculated using the Halder-Wagner method were approximately 10 times higher than those of the Williamson-Hall method because of reflections at low and mid angles in X-ray diffraction data. The dislocation density values calculated using the Williamson-Smallman method demonstrated that a decrease in crystal defects occurred with increasing molarity, that is, the crystallinity was enhanced. The presence of Tb-O bonds was proved by Fourier-transform infrared spectroscopy analysis showing that terbium carbonate powders were converted into terbium oxide by the calcination process. A nearly round morphology of produced terbium oxide powders were clearly shown in scanning electron microscopy and transmission electron microscopy images. Increasing positive tensile stress in the lattice increased the particle size and changed the powder morphology from agglomerated nearly round grains to rod-like bundles.