The enhanced laser cooling performance of rare-earth-ion-doped nanocrystalline powders is predicted, compared to the bulk material, using Yb 3+ :Y 2 O 3 as the model material. This is achieved by enhancing the off-resonance, phonon-assisted absorption, which is proportional to the three factors considered in this paper: the dopant concentration, the pumping field energy, and the excitation coefficient. Using the energy transfer theory for concentration quenching, the optimum concentration corresponding to the maximum cooling power is found to be considerably larger than the currently used value, suggesting noticeable enhancement effects for laser cooling. The pumping field energy is enhanced in random nanopowders compared with bulk crystals under the same irradiation, due to the multiple scattering of photons. Photons are thus localized in the medium and do not propagate through, increasing the photon absorption of the pumping beam ͑and it is shown that the reabsorption of the fluorescence is negligible͒. Using molecular dynamics simulations, the phonon density of states ͑DOS͒ of the nanopowder is calculated, and found to have broadened modes, and extended small tails at low and high frequencies. The second-order electronic transition rate for the anti-Stokes luminescence is calculated using the Fermi golden rule, which includes the influence of this phonon DOS, and is shown to have enhancement effects on the laser cooling efficiency using nanopowders. It is finally concluded that these three enhancement mechanisms are essentially to increase the population of the three participating carriers ͑electron, photon, and phonon͒ in the interacting volume, and this also points out directions for enhancing laser cooling performance in bulk materials.