A diode-pumped self-Q-switched 2.74 µm Er:Lu2O3 crystal solid-state laser has been experimentally and theoretically studied. Without any additional modulation elements, stable self-Q-switched pulses with a pulse width of 145.3 ns, a repetition rate of 227.8 kHz, and an average output power of 877 mW were generated. Considering the excited-state absorption on the laser photons of the Er:Lu2O3 crystal, we have simulated the dynamic process of self-pulsed generation by solving the rate equations numerically. The simulation results are consistent with the typical characteristics of a Q-switched laser.