Colossal permittivity materials exhibit extreme polarization in an applied electric field, providing applications in electronics and energy transmission. Understanding the atomic‐scale mechanism behind colossal permittivity remains a challenging task and is key to optimizing materials with this property. The fundamental mechanism of colossal permittivity is reported and, using CaCu3Ti4O12 as an example, it is attributed to the formation of an unusual metallic interface between the grain and grain boundary materials (CaCu3Ti4O12 and CuxO (x = 1, 2), respectively), not created by oxygen vacancies as is normally the case in oxide materials. This metallic layer around the grain forms confined shells of charge that pool on one side when under an applied field, which results in colossal permittivity. A route towards enhancing colossal permittivity is explained by means of manipulating the interface properties, as well as altering sample geometries. A methodology to artificially engineer colossal permittivity metamaterials is also shown.