Dy2O3 powders with high melting point and low cost have been added into the (Nd, Dy)–Fe–B sintered magnets. Strengthened local magnetocrystalline anisotropy induced by intergranular addition of Dy-containing sources is effective to simultaneously enhance coercivity and minimize remanence loss for Nd2Fe14B-type sintered magnets. In this work, the addition of Dy2O3 promotes the formation of Dy-enriched shells surrounding the 2:14:1 phase grains and reduces the grain size effectively. As a result, the magnetocrystalline anisotropy field HA of the outer regions of the matrix phase is strengthened, accompanied with reduction of local demagnetization stray fields. Enhanced coercivity Hcj from 17.5 to 24.3 kOe has been achieved by the addition of 4.0 wt% Dy2O3. The existence of Dy2O3 is also beneficial to improve the grain alignment with the remanence Br maintained above 12.0 kGs. Optimized addition of 2 wt% Dy2O3 gives rise to maximized Hcj/kOe+(BH)max/MGOe as a result of balanced coercivity enhancement and magnetic dilution effect. Intergranular addition of Dy2O3 exhibits great potential in producing Nd2Fe14B-based magnets with high coercivity and reduced material cost.