We have measured the intrinsic and 532 nm-induced optical absorption of 5 mol. % MgO-doped lithium niobate crystals at 488 nm wavelength. The measurements have been conducted employing a photothermal common-path interferometer. The absorption at 488 nm increases on simultaneous illumination with 532 nm light. This induced absorption rises linearly with the stimulating 532 nm radiation power and saturates for intensities larger than 50 kW/cm(2). A model developed recently, considering the excitation of electrons from levels near the valence band into iron centers, is applied to explain the observations.