In this study, hydroxyapatite (HA, Ca10(PO4)6(OH)2) and fluorine-substituted hydroxyapatite (FHA, Ca10(PO4)6OHF) nanopowders were synthesized through water based sol-gel technique using a novel phosphorous precursor. Transmission Electron Microscopy (TEM), BET Surface Area, X-ray Diffraction (XRD), Fourier Transform Infrared Spectroscopy (FTIR) and Thermogravimetry (TGA)/Differential Thermogravimetry (DTG) techniques were employed in order to evaluate characteristics of nanopowders. The in-vitro study of nanopowders was assessed in simulated body fluid (SBF) maintained at 37°C. The band assigned to OH---F---OH present in FTIR spectrum of FHA at 721 cm-1 confirmed the substitution of fluorine in HA lattice. The fluorine substitution was found to alter the morphology and structural parameters of apatite crystals. It also significantly lowered the BET surface area. FHA nanopowder had improved thermal stability as compared to HA in the temperature range 25°C to 1600°C. The bioactivity assay confirmed formation of an amorphous calcium phosphate layer on the surface of nanopowders after immersion in SBF solution