This paper outlines our present understanding of the conduction mechanisms and physical processes relevant to the performance of ZnO−based ceramic varistors. Varistor behavior is determined by the gross ceramic microstructure of the device as well as by the localized conduction processes which occur between grains. We show that the qualitative features of the highly nonlinear conductivity are largely independent of the details of varistor composition or processing but rather appear to be a general effect engendered by a microstructure of conducting grains surrounded by thin insulating oxide barriers. Evidence is presented from a variety of sources that this intergranular layer is ∼100 Å in thickness resulting in grain−to−grain fields of F∼106 V/cm. The conduction mechanism at breakdown is consistent with a Fowler−Nordheim tunneling process obeying a current−density−vs−field relation given by J∝exp(−γ/F), where γ is a constant. At somewhat lower fields (prebreakdown region) the conduction process follows a thermally activated Schottky−type law of the form J∝exp[−(Ei−β√F)/kT], where Ei?0.8 eV. Analysis of measured current−voltage characteristics at various temperatures in terms of these processes is a good representation of the data. The empirical power law behavior J= (F/K)α often used to describe varistor performance is shown to be an approximation of the Fowler−Nordheim relation.