Optical limiters reduce transmittance under increasing incident optical power and protect sensitive components against high-intensity illumination. Vanadium dioxide (VO2), which is known for its thermochromic properties, is a suitable material for fabricating optical limiters. However, research on its phase transition and damage mechanisms under continuous laser irradiation remains limited. In this study, the temperature-dependent optical constants that determine the performance of VO2 were obtained using the proposed dispersion calculation model. The phase transition behavior and damage mechanism of a single-layer VO2 optical limiter exposed to 1064-nm continuous laser irradiation were investigated. The results revealed that a higher laser power on the optical limiter triggered the partial oxidation of VO2 into V2O5 within the damaged region, thus causing the transmittance before and after the phase transition in the damaged area to be higher than that in the undamaged area. Utilizing the calculation model results, a performance-enhancing VO2-based Fabry–Pérot optical limiter was developed. It exhibited a higher transmittance and a lower reflectance than single-layer VO2 in the open state and a lower transmittance in the limiting state. These findings serve as valuable references for the further optimization of VO2-based optical limiters.