Dy2O3 layers have been grown on SrTiO3 by molecular beam epitaxy. X-ray and electron diffraction patterns clearly show that Dy2O3 grows epitaxially on SrTiO3 with {100} planes parallel to the substrate surface. Transmission electron microscopy reveals that the Dy2O3 film breaks up into small domains (10-40 nm). This leads to the formation of terraces which limits the structural perfection of thin overgrown DyBa2Cu307 by introducing steps and small misorientations (within 3°). The resulting surface corrugation does not preclude the growth of epitaxial c-axis DyBa2Cu307 films with a TcO of 86 K. Crystallographic analysis and image calculations show that the domain growth of Dy2O3 is associated with the formation of 90° rotation twins.