[en] V₂O₃ nanocrystals can be synthesized through hydrothermal reduction in VO(OH)₂ using hydrazine as a reducing agent. Addition of different ligands to the reaction produces nanoparticles, nanorods, and nanoplatelets of different sizes. Small nanoparticles synthesized in this manner show suppression of the magnetic phase transition to lower temperatures. Using muon spin relaxation spectroscopy and synchrotron x-ray diffraction, we have determined that the volume fraction of the high-temperature phase, characterized by a rhombohedral structure and paramagnetism, gradually declines with decreasing temperature, in contrast to the sharp transition observed in bulk V₂O₃.