Magnesium spinel (MgAl2O4) powders doped with Yb(3+) ions have been synthesized by a sol-gel method and heat-treated in the range of 700-1000 °C for 3 h. XRD patterns indicated that the powders have a cubic structure with high crystallite dispersion. Nanoparticles in the range of 10-30 nm are obtained as a function of the dopant concentration and sintering temperature. The main Yb(3+) zero-phonon line is located at 976 nm. The spectroscopic properties of the Yb(3+) ions are characterized by broad absorption spectroscopy and emission spectroscopy. Even at low temperature, the spectra reveal a strong distorted spinel lattice due to the high inversion rate between Mg(2+) tetrahedral sites and Al(3+) octahedral sites. The substitution of Mg(2+) ions by Yb(3+) ions favors the creation of Yb(3+) ion pairs which are observed in the cooperative luminescence spectra at around 500 nm. The luminescence decays are influenced by both the Yb(3+) content, the energy transfer between ions and by the presence of pairs and aggregates. Detailed analysis of the observed structural and spectroscopic measurements has been described in this manuscript.