A giant low-frequency dielectric constant (∼10⁵) has been observed in room temperature stabilized cubic zirconia nanocrystal of size range 4–8 nm. Dielectric constant strongly depends on the crystallite size. Electrical behaviour of nanocrystallites has been described by an equivalent circuit to obtain grain and grain boundary effects. Mixed valency of Zr (Zr⁴⁺, Zr³⁺) ions gives rise to electronic conduction. Giant dielectric constant has been explained by interfacial polarization because of Maxwell–Wagner type relaxation effect.