Rare-earth doped oxyfluoride glass ceramics represent a new generation of tailorable optical materials with high potential for optical-related applications such as optical amplifiers, optical waveguides, and white LEDs. Their key features are related to the high transparency and remarkable luminescence properties, while keeping the thermal and chemical advantages of oxide glasses. Sol-gel chemistry offers a flexible synthesis approach with several advantages, such as lower processing temperature, the ability to control the purity and homogeneity of the final materials on a molecular level, and the large compositional flexibility. The review will be focused on optical properties of sol-gel derived nano-glass ceramics related to the RE-doped luminescent nanocrystals (fluorides, chlorides, oxychlorides, etc.) such as photoluminescence, up-conversion luminescence, thermoluminescence and how these properties are influenced by their specific processing, mostly focusing on the findings from our group and similar ones in the literature, along with a discussion of perspectives, potential challenges, and future development directions.