New green phosphor is synthesized by reducing $LiAlO_2:xEu^{3+}$ phosphors in a low pressure $H_2$ atmosphere. The $LiAlO_2:xEu^{3+}$ prepared by a solid state reaction method is reported as red phosphor. The effect of the reduction treatment on the $LiAlO_2:xEu^{3+}$ on the crystalline phase change and photoluminescence (PL) property are characterized. The reduced phosphor had a broad green light spectrum centered at 524 nm. The PL intensity of the reduced phosphor increased to a maximum at the reduction temperature of $1100^{circ}C$. The PL intensity decreased with a further increase in the reduction temperature. The crystalline phase constituting the reduced phosphor varied with the temperature. A new crystalline phase $Li_2Al_4O_7$ was observed at $1100^{circ}C$. The origin of the green-light emission is discussed in relation to the crystalline phase change.