In optical crystals, photodarkening will occur after they were irradiated with high-energy particles, and such induced optical loss generally results in significant performance degradation whether they are used as passive or active optical elements. In the present study, the effects of neutron irradiation on the optical response of the Nd3+-doped Gd3Sc2Al3O12 (Nd:GSAG) single crystal has been revealed in real-time and in-situ. Transient and permanent transmittance reduction in the crystal induced by neutron radiation has been observed and the reduction mechanisms have been analyzed. The XRD characterization method demonstrated that the crystal structure remained constant both before and after neutron irradiation. Importantly, the X-ray photoelectron peak of the O 1s core level shifts to high binding energy, indicating that oxygen vacancies were produced in the crystal after irradiation with neutrons. Thus, the permanent reduction in the transmittance of the crystal after irradiation with neutrons can be attributed to the generation of oxygen vacancies in the crystal. To the best of our knowledge, it is the first time the damage types in rare earth oxide laser crystals caused by neutron irradiation were revealed.