Vapor transport equilibration (VTE) treatments were performed on a Y‐cut bulk Er (1.6 mol%)‐doped congruent LiNbO3 crystal and an X‐cut pure congruent crystal, on one surface of which a 40 nm‐thick film of erbium metal was coated before the VTE treatment. Scanning electron microscope, powder or single‐crystal X‐ray diffraction (XRD), polarized infrared absorption/emission of Er3+ as well as micro‐Raman spectroscopy were used to study the two VTE crystals. The results are discussed in comparison with a corresponding as‐grown bulk Er‐doped crystal, calcined ErNbO4 powder, and a locally Er‐doped congruent LiNbO3 crystal prepared by using the standard Er‐diffusion technique. The experimental results show that the VTE treatment induces the formation of micrometer‐sized ErNbO4 precipitates with the crystallographic morphology of a flat polyhedron not only on the surfaces of both crystals but also in the bulk of the homogeneously Er‐doped one. The optical absorption and emission studies show that the formation of the precipitates results in substantial spectral changes in both the 0.98 and 1.5 μm regions. The micro‐Raman studies allow to resolve four additional Raman peaks around 800 cm−1 in the E(TO) spectra of the two VTE crystals. These additional Raman peaks are associated with the characteristic vibrations with respect to the NbO43− group. Characteristic XRD, optical absorption, and emission and Raman peaks for identifying the ErNbO4 phase are proposed. Finally, the formation mechanism and light‐scattering effect of the precipitates are discussed.