Transparent Y2O3-MgO nanocomposite ceramic has been processed for mid-IR window applications. The powder was synthesized by a sol-gel route. The final temperature of this process has an impact on the crystallite size and crystallization ratio. A homogeneous powder with around 10 nm crystallite size was made with a final temperature of 600°C. The powder was then sintered by the SPS technique performing a two-step sintering process at 1200°C/50 MPa instead of a conventional bearing. A fully dense ceramic (>99%) with an average grain diameter of 150 nm (compared to 350 nm with one-stage sintering) was obtained. After HIP at 400 MPa and annealing in air for 100 h post-treatments, the IR transmittance in the 3-5 µm wavelength range exceeds 80% for a thickness of 1 mm. Transparency loss at 5 µm is less than 10% at 1000°C, which is more suitable for the IR's band II than materials such as sapphire, spinel or AlON.