Highly transparent Er:Y2O3ceramics (1–9 at.% Er) were fabricated by hot pressing sintering with ZrO2as the sintering additive. The microstructures, transmittance, luminescent properties, thermal conductivity, and mechanical properties of the Er:Y2O3ceramic samples were investigated in detail. The samples all exhibited dense and fine grain microstructures; the average grain sizes were about 0.8 μm. The transmittance levels of the samples with various Er concentrations (2 mm thick) at the wavelengths of 600 and 2700 nm were ~74 and ~83%, respectively. As the Er doping concentration increased from 1 to 9 at.%, the up-conversion luminescence of the samples gradually changed from green to red, with the intensity ratio of red/green light increasing from 0.28 to 2.01. Meanwhile, the down-conversion luminescence properties of the specimens were also studied. When the samples were under 980 nm excitation, the emission bands were detected at 1552, 1573, 1639, and 1661 nm. The thermal conductivity of the samples was found to decrease from 8.72 to 5.81 W/(m·K) with an increase of the Er concentration from 1 to 9 at.%. Moreover, the microhardness and fracture toughness of the samples with 1 at.% Er concentration were ~8.51 GPa and ~1.03 MPa·m1/2, respectively.