(Y 0.97− x Zr 0.03 Yb x ) 2 O 3 (x=0–0.15) transparent ceramics were fabricated by solid-state reaction. As ZrO 2 was introduced as additive, the transmittance of yttria ceramic was improved greatly. The optical measurements such as absorption, fluorescence spectrum and lifetime of Yb 3+ ion were carried out at room temperature. The intensities of the absorption peaks (904 and 973nm) increase linearly with Yb 3+ ion concentration. The absorption cross-section at 973nm and stimulated emission cross-section at 1032nm are calculated to be 1.175×10 −20 and 1.767×10 −20 cm 2 , respectively. The lifetime of 5.0 at.% Yb:Y 2 O 3 ceramic is measured to be 0.93ms. According to the emission spectra and measured lifetime, the optimum doping concentration of Yb 3+ ion in Y 2 O 3 transparent ceramic is in the range of 5.0–8.0 at.%. Meanwhile the up-conversion luminescence is also investigated.