Polymer blend hybrid nanocomposites are of great importance for future optoelectronic applications. This paper presents the preparation of new polymer blend hybrid nanocomposites based on PVC/PVP modified with Er₂O₃ nanoparticles. A low-cost solution casting method has been used to prepare the polymer nanocomposites at 0.0, 0.1, 0.3 and 0.6 wt% of Er₂O₃. X-ray diffraction (XRD), Fourier transform infrared (FTIR), Raman spectroscopy, and environmental scanning electron microscopy (ESEM) measurements have all been used to examine the impact of a varying wt% of Er₂O₃ on the structural and optical characteristics of PVP/PVC polymer blends. The PVC/PVP polymer blend and Er₂O₃ nanoparticles showed a strong interaction, which was validated by XRD, FTIR, and Raman spectrum investigations. The SEM micrographs showed a remarkable complexation among the components of the polymer nanocomposites. The activation energies for thermal decomposition of PVC/PVP doped with different Er₂O₃ concentrations were less than that of the pure polymer film. The linear and nonlinear refractive indexes, dispersion energy, optical susceptibility and the energy gap values were found to be Er₂O₃ concentration-dependent. With an increase in Er₂O₃ concentration to 0.1 and 0.3 wt%, the dispersion energy and nonlinear refractive index improved, and thereafter decreased when the concentration was further increased to 0.6For the film doped with 0.1 wt% Er₂O₃, the optical band gap (E_opt) of the composite film enhanced by about 13%. The optical absorption measurements revealed clear improvements with the addition of erbium oxide. Higher refractive index values of PVC/PVP/Er₂O₃ films qualify the polymer blend as a cladding for electro-optic modulators. Our results indicated that the PVC/PVP/Er₂O₃ polymer films could be suitable for optoelectronic space applications.