Density functional theory was used to study the effect of rare‐earth dopants on the structure, phase stability, and magnetic properties of α‐ and θ‐Al2O3. Lanthanide series rare‐earth dopants (Pr, Nd, Gd, Er, and Yb) were considered at a doping concentration of 0.83 at.%. Incorporation of rare‐earth dopants was found to increase the lattice parameters and exaggerate the local structural distortion around the dopant. The extent of local lattice distortion was correlated with the dopant ionic radii. The phase stability of rare‐earth‐doped Al2O3 was assessed by comparing cohesive and defect formation energies for doped and undoped α‐ and θ‐Al2O3. Rare‐earth dopants increased the relative stability of the metastable θ‐Al2O3, although doped α‐Al2O3 remained more stable. The total magnetic moment of the doped Al2O3 was shown to correlate with the number of unpaired electrons. The magnetic moment was also found to be strongly localized on the rare‐earth dopant for Er, Gd, Nd, and Pr‐doped Al2O3. In contrast, the Yb dopant induced a delocalized magnetic moment on ~80% of the oxygen atoms. These results further the understanding of dopant incorporation mechanisms, as well as the doping effect on phase stability and magnetic properties that may be applied to advanced field‐assisted material synthesis and processing for enhanced properties.