Commercial EIA-Y5V base-metal-electrode multilayer ceramic capacitors (BME-MLCCs) made of (CaO+ZrO2)-doped BaTiO3 are analyzed for the microstructure and investigated for its relation to dielectric properties. The characteristic diffuse scattering (DS) intensities observed in BaTiO3 ceramics and the featureless "solid-solution" grains in Y5V capacitor chips are originated from multiple Ti sites in the dynamic BaTiO3 structure. The pseudo-cubic (PC)-grains retaining the overall cubic (C-) symmetry metastably at room temperature are embedded with polar nanoregions (PNRs) in the ferroelectric (FE) tetragonal (T-), and rhombohedral (R-) phases, as revealed by high-resolution transmission electron microscopy (HRTEM). The presence of PNRs contributes effectively to large relative permittivity epsilon(r) approximate to 13 200 at 25 degrees C. The FE T-domains grow from within PC-grains at the expense of embedded PNRs after prolonged annealing by extending "oxidizing firing" at 950 degrees C in pO(2) = 10(-7) atm. These domains contain less Zr with otherwise homogeneously distributed solutes in PNR-dispersed PC-grains. Although preserving the relaxors characteristics, epsilon(r) is reduced to similar to 11 000 after 12 h, and then to similar to 9000 after 24 h annealing. The reduction in epsilon(r) is attributed to the annealing-induced FE T-domains grown at the expense of PNRs in PC-grains. The Vogel-Fulcher analysis indicates that Y5V ceramics are in the relaxor FE category, containing PNRs derived from polarization frustration.