Due to its to its optical, thermal, photocatalytic and electrophysical properties, nanocrystalline titanium oxide (TiO2) is widely used in various fields. In the present work, a series of pure and Gd-modified (0.5, 5, 50 mol%) TiO2 nanocrystalline powders were prepared by a novel synthesis approach – extraction-pyrolytic method (EPM). Metal containing extracts on the basis of valeric acid were used as precursors. Thermal behavior of produced individual and mixed precursors were investigated by thermogravimetric analysis (TGA) and high temperature differential scanning colometry (HDSC). Phase composition of pure and Gd-modified TiO2 powders were studied as a function of pyrolysis temperature (450o -850°C ) and gadolinium content by X-ray diffraction (XRD) method. Photocatalytic activity of produced powders was studied by photocatalytic degradation of methylene blue (MB) under UV/VIS light irradiation.