Holmium doped BaTiO3 ceramics were prepared by a solid-state reaction. Colossal dielectric permittivity (≥105) and a very low loss tangent (<1.5%) at 10 kHz were achieved. Furthermore, the ceramics exhibit excellent temperature stability with a broad operating temperature range (25–400 °C). The evolution of the concentrations of oxygen vacancies and reduced Ti3+ was estimated by the XPS. Defect dipole complexes, coupled between the negatively and positively charged defects, are responsible for the observed huge dielectric permittivity. Temperature dependence of dc conductivity demonstrates that the stability of the defect dipole complexes matches the temperature range of stable dielectric properties. The result bridges a relationship between defect dipoles and dielectric behavior to understand the huge permittivity response and low loss mechanism.