Novel transparent oxyfluoride glass ceramics were prepared and crystal phase evolution from cubic BaF2 to BaxLu1−xF2+x was achieved by the gradual substitution LuF3 for BaF2 in the glass compositions in mol% of 65SiO2–14.5B2O3–11.5Na2O–(9–x)BaF2–xLuF3 (x=0, 1, 2, 3). The corresponding crystallization mechanism was explored according to FTIR and XRD results. The enhanced emission intensity, obvious Stark splitting in the emission spectra and long fluorescence decay lifetimes of Eu3+ ions evidenced the incorporation of Eu3+ ions into the precipitated fluoride nanocrystals. Especially, along with the gradual substitution LuF3 for BaF2, much more Eu3+ ions were partitioned into the precipitated Ba1−xLuxF2+x nanocrystals, which provided a novel strategy of controlling the ionic distribution and enhancing the luminescence efficiency of rare earth ions in the oxyfluoride glass ceramics. Temperature dependent characteristics of upconversion luminescence of Er3+/Yb3+ ions in the oxyfluoride glass ceramics was investigated and a high thermal sensitivity was obtained based on the fluorescence intensity ratio (FIR) technique, which suggested that this material was a promising candidate for the optical temperature sensors.