Transparent oxyfluoride glass-ceramics containing Eu:BaYF5 nano-crystals in the newly developed SiO2–K2CO3–BaF2–YF3–Sb2O3 glass system are synthesized by melt quenching method followed by optimized ceramization process. The X-ray diffraction, transmission electron microscopy, and field emission scanning electron microscopy confirmed the precipitation of tetragonal BaYF5 nano-crystals in glass matrix. The coexistence of Eu2+ and Eu3+ ions in both glass and glass-ceramics are ascertained from their emission and excitation spectra. The in situ formation of divalent europium (Eu2+) along with Eu3+ during high temperature synthesis under ambient atmosphere is explained through optical basicity model. The Eu3+ emission from upper excitation states (5D3−1) and reduced asymmetry ratio (R = IED/IMD) in glass-ceramics have established the dopant ion incorporation into fluoride nano-crystalline environment. The observed luminescence properties of Eu:BaYF5 are compared with that of Eu:BaYF5 nanocrystals containing transparent glass-ceramics and their marked differences are discussed.