In the present study, we report the gamma (γ) ray irradiation-induced structural, optical, luminescence and radiation shielding properties of Er3+-doped Li2O-Bi2O3-B2O3-TeO2 glasses prepared by melt-quenching technique. It was evidence of the slight reductions in density and refractive index while maintaining stable optical properties upon the γ irradiation. Additionally, increased molar volume and polarizability indicated a less compact network. Raman spectroscopy shows broadened peaks and intensity reductions at key vibrational modes. The UV–Vis–NIR absorption spectra reveal the shift in the absorption edge and reduction in the intensities of Er³⁺ absorption bands (around 450, 520, 550, and 650 nm) with higher radiation doses, indicating radiation-induced damage. It was found that the band gap values decreased from 2.58 eV to 1.30 eV for un-irradiated glass to 90 kGy irradiated glass, and Urbach energy was found to increase from 0.18 to 1 eV respectively, indicating structural disorder and localized states within the band gap. PL emission spectra demonstrated intensity changes and peak shifts with γ radiation dose while maintaining a dominant green emission from 4S3/2 → 4I15/2 and 2H11/2 → 4I15/2 transitions, supported by the CIE diagram analysis. The NIR emission spectra also displayed a peak at 1530 nm with decreasing intensity, indicating defect-induced non-radiative recombination centres. Luminescence lifetime decay profiles indicated reduced lifetimes at higher γ doses, suggesting introduced non-radiative decay pathways. Furthermore, Phy-X software analysis highlighted effective γ-ray shielding influenced by chemical composition and photon flux, with MAC sharply decreasing to 1.8 cm2/g at 0.1 MeV and stabilizing, while LAC showed reduced attenuation efficiency at higher energies. HVL and TVL increased with energy, stabilizing around 4–5 cm and 15–16 cm, respectively, necessitating thicker materials for effective shielding at higher photon energies. MFP rapidly increased to 6–7 cm at 2 MeV, stabilizing at higher energies, while Zeff decreased sharply before stabilizing around 1 MeV. The EBF and EABF trends exhibited higher values at low energies, stabilizing at higher energies, indicating effective photon interaction and resonance effects.