Silicon nanocrystals, formed by ion implantation and subsequent thermal annealing, show positive optical gain under intense laser excitation. Gain has been measured by the variable strip length method where the amplified spontaneous emission intensity, which is emitted from the sample edge, is measured as a function of the excitation volume. Exponential increase, line narrowing and directionality of stimulated emission have been measured. In addition, by growing silicon nanocrystals in a quartz substrate, single pass gain in pump and probe transmission experiments has been measured. Material gain values as high as those typically found in III-V semiconductors quantum dots have been measured. We claim that population inversion is realized between the fundamental and the recently identified Si equals O interface state. This model explains the gain observations and could account for the lack of auger saturation, free carrier absorption and size dispersion. Critical issues to obtain sizable gain are (1) high oxide quality, (2) high areal density of silicon nanocrystals, and (3) nanocrystals placed in the core region of a waveguide.