Ultraviolet-visible to near-infrared quantum cutting (QC) materials are a promising tool to enhance the efficiency of conventional crystalline silicon solar cells. The spectroscopic properties of Tb3+–Yb3+ co-doped ZrO2 nanocrystals are presented, and the QC mechanisms in these nanocrystals are investigated. The materials were fabricated using the sol gel method and characterized using X-ray powder diffraction, X-ray absorption near edge structure, and luminescence spectroscopy. The incorporation of Yb3+ ions into the host induced a crystalline phase change of ZrO2 from monoclinic to tetragonal to cubic symmetry and influenced the Tb valence state. The Tb3+ visible emission, excitation intensity (monitored by the Tb3+:5D4 emission), decay time of the Tb3+:5D4 emitter level, and down-conversion (DC) emission intensity increased with Yb3+ concentration. Furthermore, a sublinear dependence of the DC intensity on the excitation power at the Tb3+:5D4 level indicated the coexistence of two different QC mechanisms from Tb3+ → Yb3+. The first one is a linear process in which one Tb3+ ion transfers its energy simultaneously to two Yb3+ ions, known as cooperative energy transfer, and the second one is a non-linear process involving an intermediated virtual level in the Tb3+ ion.