Ho³⁺ substituted BiFeO₃ nanoparticles are synthesized by tartaric acid-based sol–gel technique and their structural, magnetic, and optical properties are reported in this work. Rietveld refinement analysis of x-ray diffraction profiles reveals the formation of a pure rhombohedral phase with nanocrystalline nature for Bi_1-xHo_xFeO₃ with x = 0.05, whereas a mixed rhombohedral + orthorhombic phase is obtained for x = 0.10. Substitution induced crystal structure transformation from rhombohedral to orthorhombic phase has been noticed for x = 0.15. Raman spectroscopy also confirms a systematic structural phase transformation from rhombohedral to orthorhombic phase due to distortion in crystal on account of Ho³⁺ substitution. The room-temperature magnetic hysteresis loops suggest an enhanced magnetization in comparison to pure BiFeO₃ nanoparticles. The values of maximum magnetization are 0.71, 1.11, and 1.24 emu/g for x = 0.05, 0.10, and 0.15 samples, respectively. The dielectric properties such as dielectric constant and loss factor are improved as they decrease with increasing Ho³⁺ content. The optical band-gap of Ho³⁺ substituted BiFeO₃ nanoparticles is found ~ 2.6 eV within the visible region.