Fe2O3 Nanoparticles NP. capped with tri sodium citrate TSC and poly vinyl alchohol PVA were synthesized by chemical method using ammonia as a reduction agent. Capped Fe2O3 NPs. deposited as film by drop casting technique on glass substrates. The effect of capping agent type on the optical properties (absorption and direct and indirect band gap) were investigated. It was observed from the absorption spectra of the various synthesized materials that the type of capping used in the preparation process has a very important influence on the location of the absorption peak as well as the amount of the energy gap. The band gaps were found in the range 1.77 to 2.25 eV. And the Fourier transformation infra-red FTIR results indicated that the nanoparticles capped well with capping agents.