In the present study, the effect of particle concentration, particle diameter and temperature on the thermal conductivity and viscosity of Al2O3/water nanofluids was investigated experimentally using design of experiment approach (full factorial design). Variables were selected at two levels each: particle concentration (0.1–1%), particle diameter (20–40nm) and temperature (10–40∘C). It was observed that the thermal conductivity of the Al2O3/water nanofluids increases with increasing concentration and temperature and decreases with increase in particle diameter, while viscosity increases with increasing particle diameter. Results showed that the interaction effect of concentration and temperature also has significant effect on the thermal conductivity of Al2O3/water nanofluids. For viscosity, the interaction of particle diameter and temperature was important. Utility concept was used to optimize the properties collectively for better heat transfer performance. The optimal combination for high thermal conductivity and low viscosity was obtained at higher level of particle concentration (1%), lower level of particle diameter (20nm) and higher level of temperature (40∘C). At this condition the increment in thermal conductivity and viscosity compared to base fluid was 11.51% and 6.37%, respectively.