CdSe nanoparticles have been successfully synthesized using a novel microemulsion method at moderate temperature. It is found that with a combination of the surfactant AOT and hydrazine hydrate, it is possible to control the morphology of the nanoparticles. The hydrazine hydrate acts as both a reducing agent and a templating agent that favors the formation of a rodlike structure. The composition, morphology and optical properties of the CdSe nanoparticles were investigated using powder X-ray diffraction (XRD), transmission electron microscopy (TEM), ultraviolet-visible (UV-vis) absorption spectroscopy, photoluminescence (PL) spectroscopy, energy dispersive X-ray spectroscopy (EDX) and Fourier transform infrared (FT-IR) spectroscopy. The nucleation and growth mechanism for this system is also proposed based on a time-dependent study. This synthesis route provides a moderate temperature (100 degrees C) method for synthesizing rodlike CdSe, hence reducing the possibility of oxidation of this chalcogenide compound.