Er3+-Y3+ codoped SiO2 powdered bulks were prepared by a sol-gel process. The effect of Y3+ codoping on the fluorescence properties and structural development of Er3+-doped SiO2 is investigated. The maximum 1.54 μm photoluminescence (PL) intensity occurs in the sample with Er3+ (10 mol%)-Y3+ (50 mol%) codoped and annealed at 985°C. This can be attributed to the competition between the content of hydroxy groups and Er site symmetry. Improvement of optimum PL properties due to Y3+ codoping by a factor of ∼20 for intensity and 1.8 for the full width at half maximum (57 nm) was obtained in comparison with the Er3+-doped SiO2 system. Extended X-ray absorption fine structure analysis shows that the local chemical environment of Er3+ ions in the Er3+-Y3+ codoped SiO2 is similar to that in Er2O3. The average spatial distance between Er3+ ions is enlarged due to a partial substitution of Y3+ for Er3+ ions in the Er2O3-like local structure, which results in a reduction of the concentration quenching effect.