Spectroscopic properties of the Dy3+:Gd2SiO5 (GSO) single crystal were investigated. The polarized absorption and unpolarized emission spectra were measured at temperature ranging from 10 K to 300 K. Experimental oscillator strengths were determined from room temperature polarized absorption spectra and phenomenological intensity parameters Ω t were calculated by using the standard Judd–Ofelt theory. Low-temperature measurements were used to determine the energy level structure of two nonequivalent Dy3+ sites in the GSO crystalline host. Analysis of spectra and decay curves of the 4F9/2 emission revealed that Dy3+ ions entering nine-coordinated sites with C 3v symmetry and Dy3+ ions entering the seven-coordinated sites with C s symmetry form two distinct, well-isolated subsystems weakly coupled by the spectral energy migration process. In addition to dissimilar crystal field splitting of multiplets, the two subsystems differ significantly in the efficiency of excitation energy transfer between dysprosium ions, thereby showing dissimilar self-quenching of the 4F9/2 emission. Besides, only one of the two Dy3+ subsystems is coupled to Gd3+ ions by nonradiative Gd3+–Dy3+ energy transfer process. Laser potential related to the 4F9/2→6H13/2 yellow luminescence of dysprosium ions was assessed based on evaluation of the emission cross-section values. It was concluded that the Dy:Gd2SiO5 (Dy:GSO) is a promising material for the visible laser operation.