In this work a systematic optical characterization of the NdAl3(BO3)4 (NAB) crystal has been carried out by means of spectroscopic measurements. The energy levels (118) of the Nd3+ constituent ions have been identified and labeled by appropriate crystal field quantum numbers (μ=1/2 or μ=3/2). Laser site selective experiments revealed the presence of two nonequivalent environments for the Nd3+ ions. From room temperature absorption and emission spectra and using the Judd–Ofelt formalism the emission cross sections and quantum efficiency (η=0.1) of the metastable state 4F3/2 have been determined. By further modeling we have estimated the crystal length and output coupler transmittance which optimize laser efficiency of a diode pumped NAB laser. The optimum crystal length found in all cases is around 100 μm. Finally, the high laser efficiencies predicted (up to 61% and 45% for laser oscillation at 1.06 and 1.34 μm, respectively) make NAB an excellent candidate to be incorporated in a diode pumped microchip laser device. © 2001 American Institute of Physics.