Ion exsolution can be instrumental to engineer intergranular regions inside ceramic microstructures. BaO admixtures that were trapped inside nanometer‐sized MgO grains during gas phase synthesis undergo annealing‐induced exsolution to generate photoluminescent surface and interface structures. During their segregation from the bulk into the grain interfaces, the BaO admixtures impact grain coarsening and powder densification, effects that were compared for the first time using an integrated characterization approach. For the characterization of the different stages the materials adopt between powder synthesis and compact annealing, spectroscopy measurements (UV–Vis diffuse reflectance, cathodo‐ and photoluminescence [PL]) were complemented by an in‐depth structure characterization (density measurements, X‐ray diffraction [XRD], and electron microscopy). Depending on the Ba2+ concentration, isolated impurity ions either become part of low‐coordinated surface structures of the MgO grains where they give rise to a characteristic bright PL emission profile around λ = 500 nm, or they aggregate to form nanocrystalline BaO segregates at the inner pore surfaces to produce an emission feature centered at λ = 460 nm. Both types of PL emission sites exhibit O2 gas adsorption‐dependent PL emission properties that are reversible with respect to its pressure. The here‐reported distribution of BaO segregates between the intergranular region and the free pore surfaces inside the MgO‐based compacts underlines that solid‐based exsolution strategies are well suited to stabilize nanometer‐sized segregates of metal oxides that otherwise would coalesce and grow in size beyond the nanoscale.