In this paper, the effects of different relative permittivity (εr) of the passivation layer on off-state breakdown voltage of AlGaAs/InGaAs HEMTs are analyzed by ISE-TCAD. It is shown that as εr value increases, the off-state breakdown voltage increases. When the εr value increased to 80, the off-state breakdown voltage increased from 17.23V to 24.13V by 40.9%. This is because the peak value of electric field at the proximity of gate edge is reduced with the increase of εr value and it can lead to the improvement of the off-state breakdown voltage of device. Meanwhile, the electric field peak value near the drain edge increases with the increase of the εr value, leading to an increase in the ionization probability of electron-hole ionization under the the grid-drain area. In addition, the results also show that the channel current (IDS) and transconductance (gm) of the device are slightly reduced by the passivation layer with a high εr value, while the specific channel on-resistance is hardly degraded. Therefore, the passivation layer with a high εr value can effectively improve the breakdown voltage of the device without sacrificing the DC characteristics of the device.