Formation of self-assembling nanohills induced by irra- diation of nanosecond Nd:YAG laser pulses on the Si0.7Ge0.3/Si hetero-epitaxial structures is reported. The atomic force microscope study of the irradiated surface morphology has shown a start of nanohills formation after laser irradiation of the intensity I=7.0 MW/cm2 . The giant "blue shift" of photoluminescence spectra with maximum intensity in re- gion of 700-800 nm (1.76 - 1.54 eV) is explained by the Quantum confinement effect in the nanohills. The maxi- mum of this photoluminescence band slightly shifts to shorter wavelengths with the increase of the intensity of laser pulses used for sample treatment. Appearance of the 300 cm(-1) Ge-Ge vibration band in Raman scattering spectra for sample irradiated with I=20.0MW/cm2 is explained by Ge phase formation. Formation of the Ge-rich phase is ex- plained by localization of Ge atoms drifting toward the irra- diated surface under the thermal gradient due to strong ab- sorption of laser radiation.