Energy transfer between rare-earth (RE) ions and excitons in semiconductors has already been known for some time. In this paper we would like to direct your attention to the interaction between excitons and RE ions in ionic crystals as used, e.g. for laser applications. A suitable model substance to study these effects is RE-doped CsCdBr3. The reasons are: (i) the low phonon frequencies due to the heavy ion masses ((h) over bar omega(max) < 200 cm(-1)); (ii) metastable excitonic states in the visible spectral range; (iii) strong exciton-ion interaction due to covalent overlap of the wavefunctions. Due to the low phonon frequencies, multiphonon processes of the RE ions are reduced drastically and ion-exciton processes can be studied in more detail. The following processes were found: (i) exciton-mediated nonradiative relaxations. These processes can bridge much larger energy gaps than direct multiphonon relaxation and are more efficient. The reason is that the nonradiative multiphonon relaxation of the RE ion is dominated by a fast multistep one-phonon relaxation of the exciton by energy transfer; (ii) exciton-mediated quantum upconversion. This effect is based on a cooperative energy transfer from two excited RE ions to an exciton and a subsequent back transfer to a single ion. This process is much faster than upconversion by phonon-assisted cross relaxation between two excited RE ions; (iii) exciton-induced changes in the crystal-held splitting of RE ions. Energy levels of RE ions in resonance with the excitons show crystal-held splittings which cannot be described by the parameters suitable for the other levels. We propose an increased covalent overlap between the wavefunction of the RE ion and of the exciton-forming ligands due to hybridization as an explanation for this effect. (C) 1998 Elsevier Science B.V. All rights reserved.