Experiments have shown that thermal stability of nanoscale titania is significantly enhanced by the presence of low concentration yttrium dopants, but the mechanism of this effect is unclear. We present extended x-ray fine structure and wide-angle x-ray scattering measurements showing that yttrium is not incorporated in the nanoparticle interior but forms yttrium-oxygen clusters at the nanoparticle surfaces. The surface clusters modify the interfacial free energy, affecting the unit cell parameters, strongly inhibiting nanoparticle growth, and stabilizing the anatase phase up to 700 degrees C. Molecular dynamics calculations reproduced the experimentally observed Y-O bond lengths in surface yttrium clusters and predict a substantial lowering in anatase surface energy, in agreement with the inferred mechanism for suppression of growth and phase transformation.