The effects of material and experimental parameters on the nonvolatile two-step, two-color holographic recording sensitivity for LiNbO
3:Fe have been studied theoretically based on a two-center model. We have taken into account the direct electron transfer between the deep-trap center Fe
2+/Fe
3+ and the shallow-trap center
![Click to view the MathML source](http://www.sciencedirect.com/cache/MiamiImageURL/B6TVF-4GJKWJK-8-N/0?wchp=dGLbVlz-zSkzk)
due to the tunneling effect. The results show that the direct electron transfer between the Fe
2+/Fe
3+ and the
![Click to view the MathML source](http://www.sciencedirect.com/cache/MiamiImageURL/B6TVF-4GJKWJK-8-P/0?wchp=dGLbVlz-zSkzk)
centers plays a key role in the improvement of two-step, two-color holographic recording sensitivity. The near-stoichiometric LiNbO
3:Fe has been confirmed theoretically to be of higher recording sensitivity and larger dynamic range than the congruent one in the low intensity region. A further improvement of the recording sensitivity can be achieved by employing appropriate doping concentration and thermal reduction treatment of Fe and/or selecting appropriate gating and recording wavelengths with large photo-excitation cross-sections.