Monoclinic Ho:KY(WO4)2 crystals doped with up to 7.5at.% Ho are grown by the Top Seeded Solution Growth-Slow Cooling method. The evolution of their unit cell parameters in dependence on the Ho doping and temperature is studied. The polarized low-temperature (6K) optical absorption of the Ho3+ ion is investigated in detail to determine the energy of the Stark sub-levels. Room-temperature absorption, stimulated-emission and gain cross-section spectra of Ho:KY(WO4)2 crystals are derived for polarizations parallel to the principal optical axes, E||Np, Nm and Ng. The maximum absorption cross-section for the 5I8→5I7 transition is 1.60×10−20cm2 at 1961.0nm and the maximum stimulated-emission cross-section for the 5I7→5I8 transition is 2.65×10−20cm2 at 2056.3nm (for E||Nm). The radiative lifetime of the upper laser level of the Ho3+ ion (5I7) amounts to 4.8ms. Continuous-wave Ho3+ laser operation is achieved under in-band pumping by a Tm laser at 1946nm. In the microchip configuration, the maximum output power reached 205mW at 2105nm with a slope efficiency as high as 85%.