Two types of nanosized niobium oxides and their composites, pseudohexagonal Nb2O5 (TT‐Nb2O5), monoclinic NbO2 (M‐NbO2), and the coexistence of TT‐Nb2O5 and M‐NbO2 (TT‐Nb2O5/M‐NbO2), are successfully synthesized through the urea‐metal chloride route, and they exhibit excellent catalytic activity and photovoltaic performance in dye‐sensitized solar cells (DSSCs). First‐principles density function theory (DFT) calculations show that their catalytic activity is significantly influenced by their intrinsic electronic structures and properties. The lone‐pair 4d1 electrons of Nb4+ in M‐NbO2 enhance the Nb–I interaction and promote electron transfer from the M‐NbO2 counter electrode (CE) to I, thus resulting in superior catalytic properties in M‐NbO2‐based DSSCs. In addition, the adsorption energy of I on the M‐NbO2 surface is in the optimal energy range of 0.3—1.2 eV, and the Fermi level of M‐NbO2 is 0.6 eV, which is higher than the I3− reduction reaction potential, and I3− can be spontaneously reduced to 3I−. Herein, a general strategy for understanding the electronic structures and catalytic activities of transition metal compounds as CE catalysts for DSSCs is provided.