Ho3+/Y3+ co-doped BaF2 nanocrystals were precipitated in oxyfluoride glasses through conventional melt-quenching and subsequent thermal treatment. X-ray diffraction patterns, transmission electron microscope images and absorption spectra confirmed the incorporation of Ho3+/Y3+ ions into BaF2 nanocrystals in glass-ceramics. With the gradual substitution of Ho3+ ions by Y3+ ions, concentration dependent energy transfer between excited Ho3+ ions were suppressed and relative emission intensity at 1.2 μm band was enhanced. The maximum emission cross-section calculated was 0.60 × 10−20 cm2 in BH1-GC specimen, indicating that Ho3+/Y3+ co-doped glass-ceramics have a great potential for the development of 1.2 μm band gain medium.