Improved polycrystalline ceramic laser rods, composed of cubic solid solutions of 89–96.5 mole% Y2O3, 10–2.5% ThO2, and 1% Nd2O3, were synthesized by a conventional sintering process. This material, called Nd‐doped Yttralox (NDY) ceramic, was produced with laser threshold energies lower than that of the best commercially available Nd:glass laser rod and with a lasing efficiency ∼94% that of laser glass at 40 J of input energy under pulsed mode conditions. In a similar operating mode a NDY rod, containing 5 mole% ThO2and having dimensions 7.6×0.46 cm, delivered 0.41 J of optical energy when using an input energy of 162 J, a pump pulse of 150 &mgr;sec, and output mirror reflectivity of 70%. The lasing efficiencies depended strongly on the method of powder preparation and processing, composition, and the cooling rate from the sintering temperature. The dependence of the fluorescent linewidth on the NDY composition provides a means of appreciably varying the material gain coefficient. Active attenuation coefficients for AR ‐ coated NDY laser rods were about 2% per cm as compared to 0.76% per cm for an OI ED‐2 laser glass rod measured in the same optical cavity. The absorption component of the optical attenuation was measured to be 0.38% per cm at &lgr; = 1.06 &mgr;, indicating that the scattering component is the major contribution to the attenuation coefficient. Considerable evidence is presented which shows that submicroscopic scattering centers exist in the solid ‐ solution matrix and are related to composition fluctuations arising from (i) chemical segregation in the starting powder which is not entirely eliminated during the high ‐ temperature sintering process and (ii) the formation of extended defects or ordered zones in the solid ‐ solution phase during specimen cooling from the sintering temperature.