Dysprosium was discovered by Paul-Émile Lecoq de Boisbaudran, a French chemist, in 1886 as an impurity in erbia, the oxide of erbium. The metal was isolated by Georges Urbain, another French chemist, in 1906. Pure samples of dysprosium were first produced in the 1950s. Today, dysprosium is primarily obtained through an ion exchange process from monazite sand ((Ce, La, Th, Nd, Y)PO₄), a material rich in rare earth elements.

There are no commercial applications for dysprosium. Since it easily absorbs neutrons and has a high melting point, dysprosium might be alloyed with steel for use in nuclear reactors. When combined with vanadium and other rare earth elements, dysprosium is used as a laser material.

Dysprosium oxide (Dy₂O₃), also known as dysprosia, is combined with nickel and added to a special cement used to cool nuclear reactor rods. Other dysprosium compounds include: dysprosium fluoride (DyF₃), dysprosium iodide (DyI₃) and dysprosium sulfate (Dy₂(SO₄)₃).