Magneto-optical transparent ceramics exhibiting the Faraday effect provide new opportunities for optical isolator applications. In this study, magneto-optical transparent ceramics (Tb_0.94−xLu_0.06Ho_x)₂O₃ (x = 0, 0.005, 0.01, 0.0125, and 0.015) were successfully fabricated by reducing atmosphere sintering and hot isostatic pressing (HIP) posttreatment. The effects of x on the microstructure, in-line transmittance, and magneto-optical properties were studied. The addition of Ho³⁺ promoted the densification of the ceramics, increasing their transmittance, with the in-line transmittance of (Tb_0.93Lu_0.06Ho_0.01)₂O₃ reaching 79.05% at 1064 nm. Importantly, the Verdet constant was influenced by the doping of Ho³⁺. The highest Verdet constant of (Tb_0.925Lu_0.06Ho_0.015)₂O₃ was approximately −404 rad·T⁻¹·m⁻¹, which was approximately 6% greater than that of the undoped sample and more than 3 times that of the terbium gallium garnet (TGG) crystal.