The luminescence properties of Cr3+ions and the energy transfer between Cr3+and Nd3+ions have been studied quantitatively in yttrium aluminum garnet (YAG). The energy level diagram and the emission spectrum of4T2→4A2transition of Cr3+ions were calculated in this crystal using the single‐configurational‐coordination model and the absorption data. Our calculated &Dgr; value (the energy difference between the2Ezero‐vibrational level and the crossover point of2Eand4T2states), ∼730 cm−1at room temperature, in contrast to the previously estimated value of ∼1000 cm−1, accounts for a variety of experimental results more satisfactorily. Both the4T2and2Estates of Cr3+ions were found to contribute to the energy transfer to Nd3+ions. The contribution of the former dominates at high temperatures and the latter at low temperatures. The thermal population distribution between the4T2and2Estates of Cr3+ions was shown to be responsible for the temperature dependences of the Cr3+luminescence properties and the Cr3+to Nd3+energy transfer processes. An electric dipole–dipole interaction mechanism was found to be adequate to describe the energy transfer process for temperatures up to about 400 K. ©1995 American Institute of Physics.