Nanostructured systems that combine optical and spin transitions offer new functionalities for quantum technologies by providing efficient quantum light-matter interfaces. Rare earth (RE) ions doped nanoparticles are promising in this field as they show long-lived optical and spin quantum states, a unique feature among nanomaterials. However, further development of their use in highly demanding applications such as scalable single ion based quantum processors, requires controlling defects that currently limit coherence lifetimes. In this work, we demonstrate that a novel posttreatment process that includes multi-step high-temperature annealing followed by high-power microwave oxygen plasma processing advantageously improves key properties for quantum technologies. We obtain single crystalline nanoparticles (NPs) of 100 nm diameter, presenting bulk-like inhomogeneous linewidths (Î inh) and population lifetimes (T 1). Furthermore, a significant coherence lifetime (T 2) extension, up to a factor of 5, is successfully achieved by modifying the oxygen-related point defects in the NPs by the oxygen plasma treatment. These promising results confirm the potential of these engineered RE NPs to integrate devices such as cavity-based single photon sources, quantum memories and processors. In addition, our strategy could be applied to a large variety of oxides to obtain outstanding crystalline quality NPs for a broad range of applications.