Nanocrystals take into account the nano-sized quantum-confined effect, where k-space bulk-like dispersion disappears and discrete excitonic-like nanolevels occur within the forbidden energy gap of the material processes. Nanocrystals of cadmium iodide both un-doped and doped with copper, synthesized and grown by the standard Bridgman method, were analysed by scanning electron microscopy for the investiga-tion of the nano-confined effect on the optical nonlinearity. The second harmonic generation (SHG) of the crystals was measured and studied. The second-order optical susceptibilities in dependences of the size of the nanocrystals and of their copper contents within low levels were calculated. The results showed a clear increase in the SHG with the decrease in the thickness of the nanocrystals. The observed size dependence, however, demonstrates the nano-confined effect or nano-effect on the SHG, where the quantum confinement dominates the material’s optical properties. A significant change in the second-order optical response with copper content of the nanocrystals was also observed. The observed results are discussed by exploring the photo-induced electron–phonon anharmonic interaction for the noncentrosymmetry of the nanocrystallite’s process.