The fabrication of transparent Sc2O3 ceramics by hot pressing of self-propagating high-temperature synthesized powders was developed. The effect of lithium fluoride aid and calcination temperature on the powders properties was investigated. After calcination at 1100 °C, uniformly shaped Sc2O3 nanopowders with a primary particle size of less than 50 nm were obtained. Using the prepared powders doped with LiF fully dense optical quality Yb:Sc2O3 transparent ceramics were fabricated by hot pressing. The in-line transmittance of the sample reached 78% at a wavelength of 800 nm. Laser generation with a maximum efficiency of 24% was achieved using a 2% Yb: Sc2O3 sample.