The influence of rare-earth doping on the electrical properties of ZnO varistors was investigated. In a lower doping region, the electrical properties were greatly improved with the increase of rare-earth contents. The highest voltage gradient value of 1968.0 V/mm was obtained with a rare-earth concentration of 0.06 mol. %. The microstructure of samples with different amounts of rare-earth oxides was examined and the notable decrease of grain size was identified as the origin for the increased voltage gradient. The doped rare-earth oxides dissolved at the grain boundaries and the excessive doping reduced the voltage across the single grain/grain boundary from 2.72 V to 0.91 V. The poor electrical properties in a higher doping region resulted from the degeneration of grain boundaries and the decrease of block density