Her research interests are mesoscopic physics, complex photonic materials and devices, with a focus on non-conventional lasers and their unique applications.

[5] Whilst she was still interested in quantum electrodynamics, she started to explore new research area and launched a collaboration with Robert P. H. Chang studying the optical properties of zinc oxide.

[1] Whilst measuring the fluorescence of polycrystalline zinc oxide films, Cao observed lasing; an unexpected result given the absence of any cavity.

Cao also employed the interference of multiply scattered light as a novel mechanism for three-dimensional optical confinement and fabricated microlasers with ZnO nanoparticles.

[6] Her other area of interest is the coherent control of light transport in diffusive medium and multimode fibers, with potential applications in endoscopy and deep tissue imaging.

In collaboration with Michael A. Choma at Yale medical school, she applied her understanding of random lasing systems to the design of novel illumination sources for speckle-free imaging.

[11] Cao and Stone were the first researchers to create an anti-laser; a device in which incoming beams of light interfere with one another and cancel the outgoing waves.

In collaboration with Richard Prum and Eric Dufresne, she figured out how the vivid color of bird feather is produced by nanostructures instead of pigments.

The speckle pattern, generated by interference among the guided modes in a fiber, is unique for each wavelength and can be used as a fingerprint to identify the spectral content of the input light.