The rare-earth Nd³⁺ doped bismuth ortho-germanate Bi₄Ge₃O₁₂ (BGO), serving as an excellent kind of fast scintillator, has been widely used in many scientific and technical areas. However, there are two unsolved problems which hinder its practical applications, namely: (i) there is no detailed information about the microstructure and location sites of Nd³⁺ ions in the BGO lattice; (ii) it is difficult to determine the electric and magnetic dipole transition mechanisms of Nd³⁺ doped BGO. Here, the microstructure and site location of Nd³⁺ ions in BGO have been systematically investigated by means of an unbiased CALYPSO structure search method coupled with first principles calculations. As a result, we have for the first time identified a unique semiconducting phase of the R3 space group where impurity Nd³⁺ ions occupy exactly the host Bi³⁺ ion sites with trigonal symmetry. Based on our developed WEPMD method, new sets of free-ion, crystal field and orthogonal correlation crystal field parameters are obtained, yielding a much better agreement between the calculated and observed values for both optical energy levels and Zeeman splitting g-factors of the ground state. Starting from these new set parameters, the majority of electric dipole and magnetic dipole transition lines, including a large number of absorption and emission lines, in the region of visible and near-infrared spectra of Nd³⁺ ions in BGO are predicted and discussed. It is shown that the main emission channel of Nd³⁺ doped BGO occurs at the inter-Stark laser transitions of ⁴F₃̷₂ → ⁴I₁₁̷₂ corresponding to an emission wavelength of approximately 1064 nm. Copyright © 2017 The Royal Society of Chemistry.