Glasses from lithium-aluminum-zinc-boron-phosphorous oxide system co-doped with terbium (Tb3+) and dysprosium (Dy3+) oxides were studied for magneto-optical applications in lasers. The Fourier Transform Infrared and Raman Spectroscopy complementary analysis suggested the depolymerization of the boro-phosphate glass network by adding and increasing the rare-earth (RE) oxide content. Main UV–vis absorption maxima of Tb and Dy ions were identified at 348 and 1266 nm. Spectroscopic ellipsometry indicated a maximum refractive index of 1.56, at 400 nm, for the highest RE content. The Verdet constant amplified by increasing the RE content, reaching for the 9 mol% RE co-doped sample a value of -0.075 min/Oe/cm at 630 nm. The Faraday rotation angle was additionally confirmed by using a Faraday Cell Device, being also related to the specific paramagnetic behavior evidenced by Superconducting Quantum Interference Device magnetometry. The magneto-optical properties recommend such vitreous co-doped materials for magneto-optical devices.