Sensitization of erbium through silicon nanocrystals in silicon rich oxide (SRO) host, and the resulting luminescence at 1.54 μm were studied in detail. Silicon nanocrystals (Si-nc) were shown to work as the gateway for energy transfer to erbium atoms. Excitation of silicon nanocrystals by the incident photon flux, and the subsequent transfer of energy to erbium atoms were modeled. Effects of energy back transfer processes through co-operative up conversion and Auger related processes were incorporated. Simulation results show that increase in Si-nc incorporation would correspond to enhanced Er luminescence and a lower threshold level of excitation for population inversion. Effective capture crosssection values for the overall sensitization process were estimated to be in the range of 10-17/cm2 for moderate Si-nc incorporation densities of 1018/cm3. Strong reductions of capture cross-section values were estimated for higher excitation fluxes. Increase of Er incorporation density in SRO host with constant level of Si-nc density resulted in increases in luminescence estimations, but with reductions in effective capture cross-section values. Results reveal that, Si-nc and Er densities in a SRO system need to be optimized for efficient Er sensitization, and the feasibility of achieving stimulated emission.