Electronic structure of optimized Ge-5, Ge-17, Ge-5 - O and Ge-5 embedded in SiO2. nanoparticles have been studied by density functional theory to find out the effect of cluster size and Ge-O bond(s) on the optical energy gap between LUMO and HOMO. It was found that the optical energy gap depends on both cluster size and the number of Ge-O bonds nonlinearly. The optical energy gap was found to be in visible light range when the Ge-5 nanoparticle has been embedded in SiO2 matrix. (C) 2004 Elsevier B.V. All rights reserved.