Y₂O₃:Yb³⁺ 5 at% ceramics have been synthesized by the reactive sintering method using different commercial yttria powders (Alfa-Micro, Alfa-Nano, and ITO-V) as raw materials. It has been shown that all Y₂O₃ starting powders consist from agglomerates up to 5–7 µm in size which are formed from 25–60 nm primary particles. High-energy ball milling allows to significantly decreasing the median particle size D₅₀ below 500 nm regardless of the commercial powders used. Sintering experiments indicate that powder mixtures fabricated from Alfa-Nano yttria powders have the highest sintering activity, while (Y_0.86La_0.09Yb_0.05)₂O₃ ceramics sintered at 1750 °C for 10 h are characterized by the highest transmittance of about 45%. Y₂O₃:Yb³⁺ ceramics have been obtained by the reactive sintering at 1750–1825°C using Alfa-Nano Y₂O₃ powders and La₂O₃+ZrO₂ as a complex sintering aid. The effects of the sintering temperature on densification processes, microstructure, and optical properties of Y₂O₃:Yb³⁺ 5 at% ceramics have been studied. It has been shown that Zr⁴⁺ ions decrease the grain growth of Y₂O₃:Yb³⁺ ceramics for sintering temperatures 1750–1775 °C. Further increasing the sintering temperature was accompanied by a sharp increase of the average grain size of ceramics referred to changes of structure and chemical composition of grain boundaries, as well as their mobility. It has been determined that the optimal sintering temperature to produce high-dense yttria ceramics with transmittance of 79%–83% and average grain size of 8 µm is 1800 °C. Finally, laser emission at ∼1030.7 nm with a slope efficiency of 10% was obtained with the most transparent Y₂O₃:Yb³⁺ 5 at% ceramics sintered.