Measurements of transport and non-linear optical (NLO) properties of the new, synthesized semiconductor Pb0.9835Pr0.0165Te in the vicinity of low-temperature metal–semiconductor phase transformations were performed. A correlation between the temperature behaviour of transport properties near the phase transition and NLO susceptibilities of second- and third-order was observed. FTIR spectra show the substantial role played by the Pr3+ localized levels in the observed anomalies.Among the transport properties, the resistivity, Seebeck coefficient and specific heat were measured. The presence of the minimum at about
in the temperature dependence of the resistivity ρ(T) is due to the metal–semiconductor transition in Pb1−xPrxTe and the low-temperature upturn observed in the resistivity is well fitted by the Mott law. Substitution of PbTe by other rare earths shows the crucial role played by Pr in the observed dependences.Experimental temperature measurements using photo-induced NLO (pumped by a UV-laser as well as by second harmonics of the YAG–Nd lasers) and a probing YAG–Nd (at λ = 1.06 µm) laser, show the existence of two maxima in the photo-induced second harmonic generation (PISHG) at temperatures 17 and 30 K, the behaviours of which substantially depend on the wavelength of the pump beam. At the same time the third-order two-photon absorption possesses maxima near 50 K, i.e. at about
. Such discrepancies in the positions of the temperature maxima are caused by the difference in contributions of the photo-induced anharmonic phonons near the surfaces PISHG and the bulk. Varying the penetration depth of the photo-inducing light one can operate with the output NLO properties.