The authors observed an extremely high permittivity (similar to 35 000 at T-C) in barium zirconate titanate (BaZr0.1Ti0.9O3) ceramics with holmium substitution (1-5 mol %) in Ba site. Careful microstructural investigation and energy dispersive spectroscopy analysis of the 1-2 mol % of Ho substituted ceramics showed the enrichment of a Ho-phase along the grain boundaries with a composition close to the Ho2Ti2O7 pyrochlore. The formation of Ho rich phase resulted in the Maxwell-Wagner polarization mechanism, which leads to this unusually high permittivity. Ceramics with 3 mol % or higher Ho content showed lesser permittivity values compared to 1-2 mol %, probably due to the increase in pyrochlore phase. These high dielectric constant ceramics are useful in nanoscale devices. (C) 2007 American Institute of Physics.