The drying conditions (in vacuum or in the air) of nanoparticles consisting of Yb:Yb2O3 + 5 mole% ZrO2 obtained by sedimentation in ethanol have been found to aff ect the optical quality of the resultant ceramic samples. The studies were carried out using absorption spectroscopy in both the 200–1100 nm and near-infrared regions as well as Raman scattering. Regardless of the drying process for these nanopowders, carbonate species as well as fragments of ethanol and water are formed in the resultant ceramics, leading to complex crystalline defects containing divalent ytterbium ions. These defects lead to a loss of transparency of the ceramics and photoluminescence of trivalent ytterbium excited by laser radiation with wavelength 785 nm. The most signifi cant negative eff ect of these defects was observed in the ceramics made of nanopowders dried in vacuum.