In this work, we have investigated the electronic and optical properties of the technologically important rare earth oxide compounds-X2O3 (X: Gd, Tb) using the density functional theory within the GGA. The band structure of X2O3 have been calculated along high symmetry directions in the first brillouin zone. The real and imaginary parts of dilectric functions and the other optical responses such as energy-loss function, the effective number of valence electrons and the effective optical dielectric constants of the rare earth sesquioxides (Gd2O3 and Tb2O3) were calculated.