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Transparent cobalt‐doped magnesium aluminate spinel (Co:MgAl2O4) ceramics with a submicrometer grain size were prepared by spark plasma sintering. For the first time, the nonlinear absorption of Co:MgAl2O4 transparent ceramics was experimentally demonstrated. Both ground state absorption (σGSA) and excited state absorption (σESA) were estimated using the solid‐state slow saturable absorber model based on absorption saturation measurements performed at 1.535 μm. σGSA and σESA for 0.03 at.% Co:MgAl2O4 were found to be 4.1 × 10−19 cm2 and 4.0 × 10−20 cm2, respectively. In the case of 0.06 at.% Co:MgAl2O4 ceramics, σGSA = 2.6 × 10−19 cm2 and σESA= 5.3 × 10−20 cm2 were determined.