The electronic and optical properties of single-layer (SL) tungsten disulfide (WS2) in the presence of substitutional Holmium impurities (HoW) are studied. Although Ho is much larger than W, density functional theory (DFT) including spin-orbit coupling is used to show that Ho:SL WS2 is stable. The magnetic moment of the Ho impurity is found to be 4.75µB using spin-dependent DFT. The optical selection rules identified in the optical spectrum match exactly the optical selection rules derived by means of group theory. The presence of neutral HoW impurities gives rise to localized impurity states (LIS) with f-orbital character in the band structure. Using the Kubo-Greenwood formula and Kohn-Sham orbitals we obtain atom-like sharp transitions in the in-plane and out-of-plane components of the susceptibility tensor, Imχ∥ and Imχ⊥. The optical resonances are in good agreement with experimental data.