We demonstrated optical amplification in BaYF5: 20% Yb3+, 2% Er3+(BYF) nanocrystals doped polymer waveguide. BYF nanocrystals with an average size of ∼13 nm were synthesized by a high-boiling solvent process. Intense 1.53 μm fluorescence was obtained in the nanocrystals under excitation at 980 nm. An optical polymer waveguide was fabricated by using BYF nanocrystals doped SU-8 polymer as the core material. A relative optical gain of ∼10.4 dB at 1525 nm was achieved in a 1.1 cm long waveguide for an input signal power of ∼0.09 mW and a pump power of ∼212 mW.