The nonlinear absorption (NLA) was studied by open-aperture Z-scan experiments in the chemically reduced nominally pure LiNbO3 crystals at cw-illumination with the red (644 nm) and green (514.5 nm) laser beams. The magnitude of the measured NLA is considerably different from the reported Z-scan results obtained in as-grown LiNbO3. The positive sign of NLA obtained with the red light has been related to the generation of the small bound polarons absorbing in red and near-IR ranges. Application of green light results in the light-induced transparency, i.e., the Z-scan traces show negative sign of NLA. Intensity dependence of Z-scan traces allows for conclusion that the photo-induced dissociation of small NbLi 4þ:NbNb4þ bipolarons and sequent generation of small polarons gives the dominating contribution to the nonlinear optical absorption in reduced crystals with a large bipolarons concentration.