We present a detailed experimental and theoretical Raman investigation of quantum confinement and laser‐induced local thermal effects on hydrogenated nanocrystalline silicon with different nanocrystal sizes (3.6–6.2 nm). The local temperature was monitored by measuring the Stokes/anti‐Stokes peak ratio with the laser power density range from ~120 to 960 kW/cm2. In combination with the three‐dimensional phonon confinement model and the anharmonic effect, which incorporates the three‐phonon and four‐phonon decay processes, we revealed an asymmetrical decay process with wavenumbers ~170 and 350 cm–1, an increasing anharmonic effect with nanocrystal sizes, and a shortening lifetime with enhanced temperature and decreasing nanocrystal dimension. Furthermore, we demonstrated experimentally that for Si nanocrystals smaller than 6 nm, the quantum confinement effect is dominant for the peak shift and line broadening. Copyright © 2011 John Wiley & Sons, Ltd.