Terbium aluminum garnet (Tb₃Al₅O₁₂; TAG) ceramics are among the most promising magneto–optical materials owing to their outstanding comprehensive performance. Many works have focused on improving the optical quality of TAG ceramics. A key point for improving optical quality is ensuring the accuracy of the stoichiometric ratio and avoiding secondary phases. In this work, 0, 2, 4, or 6 wt% Sc₂O₃ was added to the TAG ceramics to increase the solid solubility. The effects of Sc substitution on the crystal structure, sintering process, microstructure, optical transmittance, and magneto–optical properties of (Tb_1−xSc_x)₃(Al_1−ySc_y)₂Al₃O₁₂ (TSAG) ceramics are studied in detail. 4 wt% Sc₂O₃:TAG ceramics with an in-line transmittance of 82.2% at 1064 nm and 81.2% at 633 nm were successfully fabricated, and the Verdet constant was 164.4 rad·T⁻¹·m⁻¹ at 633 nm. Anti-site defects (ADs) and Sc replacement in TAG are further studied via first-principles calculations to determine the working mechanism of Sc. Both the experimental and calculation results show that the introduction of Sc can effectively increase the solid solubility of TAG ceramics, suppress secondary phases, and hence improve the optical transmittance.