Thermal treatment induced phase transition of LaAlO3 in glass and its influence on glass structure and dielectric, magnetic, and Faraday rotation properties were characterized through various techniques such as nuclear magnetic resonance, X-ray neutron diffraction, transmission electron microscopy, X-ray photoelectron microscopy, vibrating-sample magnetometer, and electron paramagnetic resonance. Cubic LaAlO3 nanocrystals were synthesized and incorporated into lead-tellurite glasses, after crystallization treatment at 380 °C for 2 h, 14-17 nm-cubic LaAlO3 nanocrystals were changed to 14-27 nm-rhombohedral LaAlO3 perovskite due to the temperature-induced viscosity and strain in the melt. The phase transition of LaAlO3 nanocrystals in glass matrix was verified through versatile techniques in terms of the octahedral AlO6 distortion, SAED patterns, changes of lattice parameters calculated by Rietveld refinement, and coordination number changes of AlO6 by NMR and XPS techniques. The modification to the glass structure was yielded by phase transition through converting TeO4→TeO3, AlO6→AlO4, BO4→BO3, and producing non-bridging oxygen. In addition, the energy band gap and density of states of glass after phase transition was calculated through Density functional theory (DFT) simulation. Glass doped with 10% LaAlO3 exhibited a promising dielectric constant and good thermal stability due to the phase transition induced polarizability, and improved optical and magnetic performance which is promising for photonics device applications.