Nanoparticles of gadolinium substituted Mg-Zn ferrite, Mg 0.75 Zn 0.25 Gd x Fe 2-x O 4 (where x = 0.00, 0.05, 0.10, 0.15) have been prepared by the sol-gel technique. The lattice constant is found to increase with increase in the Gd 3? ion concentration. The observed variation of dielectric constant with frequency is explained on the basis of the MaxwellWagner two layer model and the electron hopping mechanism. The dielectric constant and dielectric loss decrease with Gd 3? ion substitution. The variation of AC conductivity with frequency suggests that the conduction is due to small polaron hopping. It is also noticed that the dielectric constant and the AC conductivity increase with temperature and it is explained in terms of the thermally enhanced drift mobility of the charge carriers. The observed low value of dielectric constant and also the dielectric loss factor obtained for gadolinium substituted ferrites make them desirable for high frequency applications.