A novel colloidal co-casting process was developed to fabricate laser quality, multisegment composite ceramic laser gain materials. The approach was demonstrated for a three segment transparent composite rod 62 mm long by 3 mm diameter consisting of undoped yttrium aluminus garnet (YAG), 0.25% Er:YAG, and 0.5% Er:YAG. The Er concentration profile in the composite has steep, controllable gradients at the segment interfaces, while maintaining constant dopant concentrations within each segment. The composite rod has 84% transmittance at 1645 nm (the lasing wavelength) with a scatter loss of 0.4% cm−1. Laser operation of such a composite Er:YAG ceramic rod was demonstrated for the first time, with nearly equivalent lasing behavior to an Er:YAG single crystal rod.