In this paper, physicochemical properties of pure Y2O3 and samarium (Sm)-doped Y2O3 transparent ceramics obtained via arc plasma melting are presented. Yttria powder with a selected molar fraction of Sm was first synthesized by a solid-state reaction method. High transparent yttria ceramics were obtained by arc plasma melting from both the pure and Sm oxide-doped powders. The morphological, chemical and physical properties were investigated by X-ray diffraction and scanning electron microscopy. The optical band gap was calculated from the absorption spectra so as to understand the electronic band structure of the studied materials. Samples indicate a series of luminescence bands in the visible region after excitation by laser light in the range from 210 to 250 nm. Magneto-optical measurements were carried out in the 300–800 nm range at room temperature. It can be seen that a maximum Verdet constant ca. 24.81 deg/T cm was observed for 405 nm and this value decreases with increasing wavelength. The potential usefulness of the polycrystalline material dedicated to optics devices is presented.