Nd,Ho:CaYAlO4 (Nd,Ho:CYA) crystals with two different Nd3+ doping concentrations for ∼3 µm mid-infrared (MIR) laser were grown successfully by the Czochralski method. The sensitization and deactivation effects of Nd3+ ions were analyzed based on the polarized absorption spectra, mid-infrared and upconversion fluorescence spectra and fluorescence decay curves in detail. Excited by 808 nm laser diode (LD), strong 2.86 µm emission was observed. The maximum emission cross section was calculated to be 1.93 × 10-20 cm2 in 1.0 at.% Nd, 2.5 at.% Ho:CYA, and the FWHM was about 115 nm. The ∼3 µm emission was enhanced by 10 times compared to the 2.5 at.% Nd, 2.5 at.% Ho:CYA crystal. Due to the dual function of Nd3+ as effective sensitizing and deactivating ion, 1.0 at.% Nd, 2.5 at.% Ho:CYA had a relatively longer lifetime 0.240 ms for the upper level 5I6, while the lifetime of the lower level 5I7 reduced to 0.723 ms, which was greatly advantageous to the population inversion. The calculated deactivation efficiency from Ho3+: 5I7 to Nd3+: 4F13/2 was estimated to be 89.66%. All results indicated that 1.0 at.% Nd, 2.5 at.% Ho:CYA crystal is a promising gain medium for ∼3 µm tunable and ultrafast laser output under 808 nm LD pump.