High dose of ion implantation followed by annealing is considered a feasible way to generate thermally stable nanoclusters inside a transparent host matrix. Low energy (50 keV) Li ions have been implanted into single crystals of alumina with different fluence (1 X 10¹⁵-1 X 10¹⁷ ions/cm²). The samples have been annealed at temperatures ranging from 500 to 1100 ºC in air in step of 100 ºC. Depth dependent Doppler broadening measurements have been carried out using high purity germanium detector coupled to a variable energy slow positron beam. Fractional area in the central and wing regions of Doppler broadened annihilation radiation spectrum, namely, S- and W- parameters, were evaluated from each spectrum. Any variation in positron annihilation probability with valence and core electrons which occurs on trapping of positrons at a defect site is reflected in these parameters. The effect of ion fluence and annealing temperature on evolution of defects and formation of embedded Li nanoclusters have been studied by indexing the variation in line shape S- (W-) parameter as a function of positron implantation depth. These studies supplemented by theoretical calculations confirm that with annealing up to 700 ºC, vacancy clusters are created due to the aggregation of vacancies wherein Li nanoclusters are formed. On annealing at higher temperature, there is evidence for the breakdown of these Li clusters leaving behind vacancy clusters in the samples.