Erbium-substituted yttrium oxide Y1.8Er0.2O3 was hydrothermally obtained and optically examined. Steady state photoemission was detected in the VIS and NIR spectral range. The system was selectively pumped with green and red lasers (λem-532, 655 nm) for population of the manifolds 2H11/2 , 4F9/2 of the Er3 ion. Bright room temperature emission at 1535 nm was observed from the 4I13/2 multiplet of the Er3 ion under selective excitation. As the temperature decreased to 10 K under green excitation, the emission maximum was shifted to 1550 nm and its intensity increased. The energy transfer mechanisms were proposed. Stark splitting analysis of the emission transitions4I13/2 →4I15/2, was performed.