Nanopowders of TiO2 has been prepared using a microwave irradiation-assisted route, starting from a metalorganic precursor, bis(ethyl-3-oxo-butanoato)oxotitanium (IV), [TiO(etob)2]2. Polyvinylpyrrolidone (PVP) was used as a capping agent. The as-prepared amorphous powders crystallize into anatase phase, when calcined. At higher calcination temperature, the rutile phase is observed to form in increasing quantities as the calcination temperature is raised. The structural and physicochemical properties were measured using XRD, FT–IR, SEM, TEM and thermal analyses. The mechanisms of formation of nano-TiO2 from the metal–organic precursor and the irreversible phase transformation of nano TiO2 from anatase to rutile structure at higher temperatures have been discussed. It is suggested that a unique step of initiation of transformation takes place in Ti1/2O layers in anatase which propagates. This mechanism rationalizes several key observations associated with the anatase–rutile transformation.