A novel optically transparent ceramic nanocomposite Y2O3-MgO was produced using spark plasma sintering technique. Sintering parameters was optimized to obtain fully dense material while maintaining nanoscale grain size. The sintered nanocomposite has an excellent infrared transmission as a result of small grain size and homogeneous microstructure. Postsinter annealing can significantly improve the transmission. Overly larger grain size severely degrades the transmittance.