Nd ³⁺ doped Lu₂O₃ crystal has been suggested to be potential gain medium for high-power solid-state lasers due to the high thermal conductivity, low phonon energy and excellent optical properties. Because of the extremely high melting point of above 2400 ℃, great attention has been paid to the Lu₂O₃-based transparent ceramics considering the comparable optical properties and laser performance with single crystal. In this work, we aimed at fabricating highly transparent Nd:Lu₂O₃ ceramics and investigating the optical properties and laser performance. 1.0at%Nd:Lu₂O₃ ceramics were fabricated by two-step sintering, namely vacuum sintering along with hot isostatic pressing (HIP) method, from coprecipitated nano-powders. The microstructures of the as-prepared powder, green body and ceramics were studied. The average grain size of the HIPed ceramics is 724.2 nm. The final ceramic sample has the in-line transmittance of 82.4% at 1100 nm (1.0 mm thickness). The absorption cross-section of 1.0at%Nd:Lu₂O₃ ceramics at 806 nm is 1.50´10^-20 cm² and the calculated emission cross-section from fluorescence spectrum at 1080 nm is about 6.5´10^-20 cm². The mean fluorescence lifetime, 169 ms, of the⁴F_3/2·⁴I_11/2 was measured at the two excitation wavelengths of 878.8 and 895.6 nm, respectively. Laser performance of the annealed ceramic sample was investigated in quasi-continuous wave (QCW) condition. A maximum laser output power of 0.47 W with a slope efficiency of 8.7% is obtained by using an output coupler with a transmission of T_OC=2.0%. Briefly, laser level Nd:Lu₂O₃ transparent ceramics with high optical transparency and uniform microstructure have been fabricated, which are promising gain media for solid-state lasers.