The Ruby provided in CentOS is 1.8.1, it’s too old. At least 1.8.3 is required for RubyGems. The good news is that CentOS-Testing has the new Ruby version.

Setup CentOS-Testing
gvim /etc/yum.repos.d/CentOS-Testing.repo

[testing]
name=CentOS-$releasever - Testing
arch=$basearch&repo=testing
baseurl=http://dev.centos.org/centos/$releasever/testing/$basearch/
gpgcheck=1
enable=0
gpgkey=http://dev.centos.org/centos/RPM-GPG-KEY-CentOS-testing


Install Ruby

yum --enablerepo=testing install ruby ruby-devel ruby-rdoc


Install RubyGems

wget http://rubyforge.org/frs/download.php/57643/rubygems-1.3.4.tgz
tar xvzf rubygems
ruby rubygems-1.3.4/setup.rb


Install Rails

gem install rails