Lanthanide (Ln³⁺) based ferroelectric phosphors, with an integration of PL emission and ferroelectric effect, are unveiling an exciting realm of possibilities for multifunctional ferroelectric-optic materials. However, how the ferroelectric host enables the tuning on the PL emissions through modulating the local structure (e.g., lattice site, symmetry, strains etc.) of the Ln³⁺ activator is not established yet. In this work, a luminescent-ferroelectric material, i.e. Dy³⁺ doped BaTiO₃ ceramic (Ba_1-xDy_xTiO₃ (x = 0–0.07), abbr: BTO:Dy³⁺), was explored to address the aforementioned issues. The BTO:Dy³⁺ ceramics were synthesized by a solid-state reaction method. The crystal structure, photoluminescence (PL) and electric properties (dielectric constant, ferroelectric hysteresis and piezoelectric hysteresis loop) were systematically investigated. The BTO:Dy³⁺ ceramics show two predominant emission peaks, corresponding to the blue magnetic dipole transition (477 nm, ⁴F_7/2 → ⁶H_15/2) and yellow electric dipole transition (573 nm, ⁴F_7/2 → ⁶H_13/2), the intensity ration of which can be modulated by the ferroelectric polarization that causes the slight lattice deformation. Such a polarization-emission modulation combining with the Dy³⁺ doping could accelerate the color change, from yellow to blue, which is characterized to detect the phase transition, with a method and mechanism were proposed, that is, the phase change is reflected by the PL characteristic peak intensity ratio. Therefore, the current results offer a convenient photoluminescence method for detecting the ferroelectric phase transition and a feasible approach to study the interaction between the photoluminescence and polarization in ferroelectric materials, for providing new insights for the development of multifunctional materials.