Diamond crystallization in Mg-R2O3-C systems (R = Nd, Sm, Eu, Tb, Dy, Ho, Er, Tm, and Yb) was studied at 7.8 GPa and 1800◦C. It was found that rare-earth oxide additives in an amount of 10 wt % did not significantly affect both the degree of graphite-to-diamond conversion and crystal morphology relative to the Mg-C system. The effect of higher amounts of rare-earth oxide additives on diamond crystallization was studied for a Mg-Sm2O3-C system with a Sm2O3 content varied from 0 to 50 wt %. It was established that with an increase in the Sm2O3 content in the growth system, the degree of graphite-to-diamond conversion decreased from 80% at 10% Sm2O3 to 0% at 40% Sm2O3. At high Sm2O3 contents (40 and 50 wt %), instead of diamond, mass crystallization of metastable graphite was established. The observed changes in the degree of the graphite-to-diamond conversion, the changeover of diamond crystallization to the crystallization of metastable graphite, and the changes in diamond crystal morphology with increasing the Sm2O3 content attested the inhibiting effect of rare-earth oxides on diamond crystallization processes in the Mg-Sm-O-C system. The crystallized diamonds were studied by a suite of optical spectroscopy techniques, and the major characteristics of their defect and impurity structures were revealed. For diamond crystals produced with 10 wt % and 20 wt % Sm2O3 additives, a specific photoluminescence signal comprising four groups of lines centered at approximately 580, 620, 670, and 725 nm was detected, which was tentatively assigned to emission characteristic of Sm3+ ions.