The principal parameters characterizing the low‐temperature magnetic and thermal properties of Tb(OH)3have been inferred from measurements of optical fluorescence and absorption spectra of single crystals. Zeeman effect measurements in fields up to 36 kOe have determinedg‐values for various single ion levels; in particularg∥=17.7±0.2 for the ground state. This compares well with the value obtained from magnetization measurements and with the value predicted by a crystal field analysis based on a fit of the observed zero field energy levels. The onset of magnetic order near the Curie point (3.7°K) produces shifts and splittings of the observed spectra. At 1.3°K in zero external magnetic field, the ground state is split by 6.4±0.2 cm−1, which together with the observedg‐value implies an effective internal field of 7.8±0.2 kOe parallel to thecaxis. This value is close to other estimates based on bulk measurements and shows that the interaction is predominantly, but not exclusively due to magnetic dipole coupling. The existence of a small, additional antiferromagnetic interaction is inferred, and this is supported by the zero‐field splittings observed in other levels.