The synthesis and characterization of Y 2-x Fe x O 3 (where x = 0-0.3) compounds has been carried out for their importance in the field of multiferroic materials. The powder X-ray diffraction reveal that the compounds Y 1.95 Fe 0.05 O 3 , Y 1.9 Fe 0.1 O 3 , Y 1.85 Fe 0.15 O 3 and Y 1.8 Fe 0.2 O 3 crystallize in tetragonal structure whereas Y 1.75 Fe 0.25 O 3 and Y 1.7 Fe 0.3 O 3 compounds crystallize in orthorhombic structure. The change in crystal system with respect to the concentration of Fe may be attributed to the variation in occupancy position of Fe 3? into the Y 3? site of Y 2 O 3 system. Variation in crystal structure, surface morphology and composition was studied by micro-Raman analysis, SEM and EDX analysis. The shift in intense Raman signals from 426 to 385 cm -1 confirms the change in the crystal structure of the prepared compounds. Further it is also identified that the E g mode of vibration is the dominant in the Fe substituted compounds. The substitution of Fe in the Y 2 O 3 system leads to the increase in the intensity of resonance band, which indicates a large polarisability variation in the Y 2-x Fe x O 3 compounds. Diffused reflectance studies show a red shift in energy gap values while increasing the concentration of Fe. The room temperature magnetization and electron paramagnetic resonance studies reveal that the incorporation of Fe in the Y 2 O 3 system leads to magnetic phase change from diamagnetic to ferromagnetic. The electric polarization studies imply that the substitution of lower ionic radii element Fe 3? in the Y 3? site leads to distortion in the lattice and show the way to spontaneous dipole moment and it was found that the Y 1.8 Fe 0.2 O 3 compound exhibits the possibility of multiferroic behaviour. Therefore this paper explores the possibility of inducing ferromagnetic and ferroelectric behaviour in the Fe substituted yttrium oxide system.