To understand the effects of In2O3 on the microstructure, grain size dispersion, density and nonlinear electrical characteristics, ZnO–V2O5–Nb2O5 varistor ceramics with 0.02, 0.05 and 0.1 mol.% In2O3 were fabricated via sintering at 950–975 °C for 1 h. The sintered samples were evaluated by x-ray diffraction, scanning electron microscopy, density measurements and electrical measurements through a voltage source meter. In2O3 addition improves relative density to ≥99 % and acts as an efficient grain growth inhibitor, resulting in a narrower grain dispersion and finer ZnO grains due to the formation of In–V–O intergranular phases. The breakdown potential (E1mA) increases sharply to 7.49 ± 0.3 kV/cm (from 1.66 ± 0.1 kV/cm) as a result of grain size reduction to 2.1 ± 0.1 μm (from 3.89 ± 0.2 μm) with In concentration of 0.1 mol.% (from 0.02 mol.%). Doping of In2O3 improves the nonlinear exponent and reduces the leakage current density as a direct consequence of enhanced Schottky barrier height.