We identify and analyze dephasing mechanisms that broaden the optical transitions of rare-earth ions in randomly oriented transparent ceramics. The study examines the narrow 7 F0 ↔ 5 D0 transition of Eu 3+ dopants in a series of Y 2 O 3 ceramic samples prepared under varying conditions. We characterize the temperature and magnetic field dependence of the homogeneous linewidth, as well as long-term spectral diffusion on time scales up to 1 s. The results highlight significant differences between samples with differing thermal treatments and Zr 4+ additive concentrations. In particular, several distinct magnetic interactions from defect centers are observed, which are clearly distinguished from the broadening due to interactions with two-level systems and phonons. By minimizing the broadening due to the different defect centers, linewidths of the order of 4 kHz are achieved for all samples. The linewidths are limited by temperature-dependent interactions and by an interaction that is yet to be identified. Although the homogeneous linewidth can be narrowed further in these ceramic samples, the broadening is now comparable to the linewidths achieved in rare-earth-ion-doped single crystals. Thus, this work emphasizes the usefulness of studying ceramics to gain insights into dephasing mechanisms relevant to single crystals and suggests that ceramics may be an interesting alternative for applications in classical and quantum information processing.