In this paper, pure phase Nd-doped YAG powders were prepared by co-precipitation method with different amount of MgO (0~ 0.6 wt %) as additive. Transparent Nd:YAG ceramics were fabricated by vacuum sintering at 1750°C for 10 hours using the powders. Microstructure of the surfaces of thermally etched Nd:YAG ceramics was observed by SEM. Transmittance of the transparent Nd:YAG ceramics was measured over the wavelength region from 600nm to1200nm. The results showed that MgO as sintering aid can restrain abnormal grain growth and reduce pores in grains and at the same time, optical transmittance of the ceramics was increased. The optimal weight percentage of MgO added can be determined as 0.3wt % for the fabrication of transparent Nd:YAG ceramics.