Abstract Promise of Si nanocrystals highly depends on tailoring their behaviour through doping. Phosphorus-doped silicon nanocrystals embedded in a silicon dioxide matrix have been realized by a co-sputtering process. The effects of phosphorus-doping on the properties of Si nanocrystals are investigated. Phosphorus diffuses from P–P and/or P–Si to P–O upon high temperature annealing. The dominant X-ray photoelectron spectroscopy P 2p signal attributable to Si–P and/or P–P (130 eV) at 1100 °C indicates that the phosphorus may exist inside Si nanocrystals. It is found that existence of phosphorus enhances phase separation of silicon rich oxide and thereby Si crystallization. In addition, phosphorus has a considerable effect on the optical absorption and photoluminescence properties as a function of annealing temperature.