Lu3Al5O12:Ce (LuAG:Ce) phosphor ceramics (PCs) with the excellent thermal stability and high saturation threshold are considered as the best green-fluorescent converters for high-power laser diodes (LDs) lighting. In this study, the effects of sintering additives and sintering processes on the transmittance and microstructure of LuAG:Ce PCs were systematically studied, and the luminescence performance of ceramics with different transmittance was compared. LuAG:Ce PCs with the transmittance of 80% (@800 nm, 1.5 mm) were obtained by using 0.1 wt.% MgO and 0.5 wt.% TEOS as sintering additives, combined with optimized vacuum pre-sintering and hot isostatic pressing. Compared to the non-HIP samples, the transmittance had increased by 11%. The microstructure of ceramics indicated that high transparency was closely related to the decrease in intergranular pores. Notably, the luminous efficiency of 253 lm/W and its saturation thresholds of > 46 W/mm2 were obtained simultaneously in green-emitting LDs devices. Moreover, under 3W laser irradiation, highly transparent ceramics had the low surface temperature of 66.4 °C, indicating the good heat dissipation performance. The observed high luminous efficiency and high saturation threshold of LuAG:Ce PCs were attributed to fewer pores and oxygen vacancies. Therefore, this work proves that highly transparent LuAG:Ce PCs are promising green-fluorescent converters for high-power LDs lighting.