The agglomeration state of nano-powders affects the microstructure of ceramic nano composites, and hence its optical and mechanical properties. In this paper, Y2O3-MgO nano-powder was synthesized by sol-gel method. Y2O3-MgO nano composites with excellent optical and mechanical properties were prepared by using hot pressing sintering (HP). The effects of the molar ratio of metal ions to citric acid (m/c) in the precursor on the agglomeration state of nano-powders and the optical and mechanical properties of the nano composites were studied. For the molar ratio of metal ions to citric acid of 0.75, the agglomeration state of the powder is the lowest. Y2O3-MgO nano composites prepared by hot-pressing sintering have an uniform phase domain, an average grain size of 140 nm, and an in-line transmittance of 80% within 3~6 μm wavelength range. Vickers hardness, fracture toughness and bending strength are 10.90 GPa, 2.21 MPa·m-1/2 and 226 MPa, respectively.