Faraday isolators can prevent the front-end system from disturbance and damage caused by a back-reflected beam, so they are important elements in laser systems. As magneto-optical materials are the most important component in Faraday isolators, the studies on magneto-optical materials have attracted much attention these years. Tb 3 Al 5 O 12 (TAG) ceramics are considered to be one of the most promising magneto-optical materials for visible to near-infrared wavelength band application because of their outstanding comprehensive magneto-optical performance. However, the optical quality of TAG ceramics needs further optimization to meet the application requirements. In this work, high optical quality (Tb 1−x Y x ) 3 Al 5 O 12 (x = 0, 0.05, 0.1, 0.2, and 0.3) magneto-optical ceramics were fabricated successfully by solid-state reaction sintering combined with hot isostatic pressing (HIP) post-treatment. All the ceramics obtained showed a single garnet phase for different values of x in the range studied. The addition of Y 2 O 3 was found to suppress the secondary phase and improve optical quality significantly. The ceramic samples obtained had clear grain boundaries and possessed the inline transmittance values of 82.9% at 1064 nm and 82.2% at 633 nm, respectively. The Verdet constants of (Tb 1−x Y x ) 3 Al 5 O 12 ceramics with x = 0, 0.05, 0.1, 0.2, and 0.3 were −188.1, −175.4, −168.5, −143.0, and −119.9 rad/(T•m), respectively. The thermal conductivity of TAG ceramics was found to be 5.23 W/(m•K) at 25 ℃, and when 20% Y was substituted in place of Tb, the thermal conductivity decreased by only 9.4%.