Er-Yb co-doped phosphate glass waveguide lasers are theoretically studied in order to understand the role of the energy transfer in Er-Yb co-doped system. The rate equations of Er-Yb codoped system coupled with the laser signal and pump photon flux equations are solved using overlapping integral method, the Er-Yb energy transfer processing is studied in detail, and the effects of Er-Yb energy transfer on the characteristics of waveguide lasers pumped by a 980 nm source are discussed. Numerical results demonstrate that effect of Er-Yb energy transfer (cross-relaxation factor) on the output power of laser is not obvious. Yb3+ ions play the role of eliminating the “cluster” of Er3+ due to high concentration and improving the pumping efficiency.