The influence of SiO$_2$on the microstructure and electrical properties of zinc oxide varistor was investigated. Zn$_2$SiO$_4$third phase in the sintered body was found at grain boundaries, multiple grain junctions, and occasionally within ZnO grains. This phase acted as a grain growth inhibitor, which retard the grain growth of the ZnO matrix by impeding migration on the grain boundaries. As SiO$_2$ addition increases, average grain size decreased from 40.6${mu}{ extrm}{m}$ to 26.9${mu}{ extrm}{m}$ due to the pinning effect by Zn$_2$SiO$_4$ and drag effect by Si segregation at grain boundaries, the breakdown voltage consequently increased. When SiO$_2$ addition is increased, interface state density decreased, however, the barrier height increased by decrease of donor concentration, as a result, the nonlinear exponent increased and leakage current decreased. While, as SiO$_2$ addition increase, it was found that the apparent dielectric loss factor shows a tendency of decrease. Wholly, electrical properties of zinc oxide varistor can be said to be improved by SiO$_2$addition.