Transparent cubic alumina (γ-Al₂O₃) ceramics are promising optical materials but are challenging to densify without phase transformation or cracking. Herein, we report a novel H₂O-assisted high-pressure sintering (HPS) strategy that enables the fabrication of highly transparent, crack-free γ-Al₂O₃ ceramics at temperatures as low as 300 °C. By combining GPa-level pressures (0.8–5 GPa) with precisely controlled H₂O concentrations (5–75 wt%) as a transient solvent, we achieve near-theoretical densities (> 99%) and exceptional optical transmittance (> 80% in the visible range). Systematic investigation reveals a non-monotonic dependence of densification and transparency on H₂O content, with an optimal concentration of ~15 wt% under 5 GPa. Microstructural and spectroscopic analyses correlate superior optical quality with a pore-free, nanocrystalline microstructure and the absence of secondary phases. Crucially, through integrated first-principles calculations and ab initio molecular dynamics simulations, we unravel the atomic-scale mechanism. Namely, under high pressure, H₂O dissociates at the particle interface, with the resultant H⁺ forming Al–H bonds and OH⁻ incorporating into interstitial lattice sites. This process stabilizes a hydroxyl-cubic aluminate (HAl₂O₄)-like structure, which not only facilitates stress-free densification via an enhanced dissolution–precipitation pathway but also effectively relieves internal stresses that typically cause cracking in pressure-only sintering. This work provides a fundamental mechanistic understanding of the synergistic role of H₂O and ultra-high pressure in low-temperature ceramic consolidation, establishing a generalizable route to transparent nanocrystalline ceramics that are otherwise inaccessible via conventional thermal sintering.