The effect of Nd2O3 on thermal and ballistic properties of ammonium perchlorate (AP) based composite propellant has been studied during this work. The composite propellant batches were prepared by slurry cast technique using sigma blade mixer. Ballistic parameters were determined by acoustic emission technique. Significantly, lower pressure index values in lower pressure range (50-70 kg/cm(2)) and higher pressure index values in higher pressure range (70-125 kg/cm(2)) were achieved when Nd2O3 was used in place of Fe2O3. DSC studies suggest that Nd2O3 promotes exothermic reaction in condensed phase which compensate heat sink effect unlike in case oil Fe2O3.