ZrO2 is an attractive host matrix for luminescence material because of its excellent physical properties, such as low phonon energy and wide band gap. In this work, the highly transparent Tm2O3 and Yb2O3 co-doped yttria stabilized zirconia (YSZ) (abbreviated as Yb/Tm: YSZ) single crystals were grown by the optical floating zone method. The Yb/Tm: YSZ samples were stabilized in the cubic phase at room temperature when Yb3+ and Tm3+ replaced Y3+. The influence of Yb3+ co-doping on the up-conversion luminescence properties of the crystals was systematically studied. A total of 0.5 mol% Tm2O3 and 2.0 mol% Yb2O3 co-activated YSZ single crystal (abbreviated as 2.0Yb/Tm: YSZ) has the maximum luminous intensity. There were seven absorption peaks located at around 358, 460, 679, 783.3, 850–1000, 1200, and 1721.5 nm that were observed in the absorption spectrum of the 2.0Yb/Tm: YSZ single crystal. There were three up-conversion peaks at around 488, 658 and 800 nm that were observed when the Yb/Tm: YSZ samples were excitated at 980 nm. The fluorescence lifetime of Tm3+ for the 1G4→3H6 transition of the 2.0Yb/Tm: YSZ sample is 7.716 ms as excited with a 980 nm laser. In addition, the oscillator strength parameters Ωλ (λ = 2, 4 and 6) of this sample were derived by the Judd–Ofelt theory to evaluate the laser performance of the host materials. The ratio Ω4/Ω6 of this sample is 0.80, implying its excellent laser output. Therefore, the 2.0Yb/Tm: YSZ single crystal is a considerable potential material for laser and luminescence applications.