Erbium-doped Si nanocrystal based optical waveguides were formed by Er and Si ion implantation into SiO2. Optical images of the waveguide output facet show a single, well-confined optical mode.Transmission measurements reveal a clear Er related absorption of 2.7 dB/cm at 1.532 µm, corresponding to a cross section of 8 x10-20 cm2. The Si nanocrystals act as sensitizers for Er but under high doping conditions (~50 Er ions per nanocrystals) no pump-induced change in the Er related absorption is observed under optical pumping (l=458 nm), which is ascribed to an Auger quenching effect. For very high pump powers, a broad absorption feature is observed, attributed to free carrier absorption.