Optical spectra of the Pb1-xEuxTe (0 ≤ x ≤ 1) solid solution are analyzed. This material as high-quality epitaxial layers is at present available in labs and it is used for infrared heter- olasers and Bragg mirrors. In infrared optical experiments, in addition to band-to-band transitions, the localized Eu states appear as discrete narrow or wide lines indicating the rare-earth (RE) ion interaction with crystal surrounding. The absorption and emission of the discrete lines are caused by the 4f7 (8 S7/2) ↔ 4f6 (7 FJ)5dt2g transitions. It is topical to investigate both experimentally and theoretically the energy spectrum and transition intensities in Pb1-xEuxTe in the 1 – 500 meV energy range which corresponds to the middle and far IR region. The interactions which should be taken into account are: p-d conduction band hybridization; crystal field and spin-orbit interactions for both f- and d-electrons; s-f, p-f and d-f exchange interactions.