Dielectric materials with high permittivity are strongly demanded for various technological applications. While polarization inherently exists in ferroelectric barium titanate (BaTiO₃), its high permittivity can only be achieved by chemical and/or structural modification. Here, we report the room-temperature colossal permittivity (~760,000) obtained in xNd: BaTiO₃ (x = 0.5 mol%) ceramics derived from the counterpart nanoparticles followed by conventional pressureless sintering process. Through the systematic analysis of chemical composition, crystalline structure and defect chemistry, the substitution mechanism involving the occupation of Nd³⁺ in Ba²⁺ -site associated with the generation of Ba vacancies and oxygen vacancies for charge compensation has been firstly demonstrated. The present study serves as a precedent and fundamental step toward further improvement of the permittivity of BaTiO₃-based ceramics.