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A theoretical model to describe Holmium-doped fiber lasers pumped by Laser-diodes around 1.125 μm is presented. With considerations of important energy transfer processes, such as laser re-absorption, cross-relaxation (CR), energy transfer upconversion (ETU), and excited state absorption (ESA), good agreement is achieved between the simulations and experimental measurements. The ESA process is found playing an important role to the fiber laser performance, and the CR and ETU processes make a negative contribution to the lasers. On the basis of the model, optimization of the lasers threshold and slope efficiency as well as output power on the length of active media, the output coupling, pump wavelength, and Ho3+ ions concentration are investigated. It is found that lower doping concentration (about 5000 ~ 10000 ppm) for the fiber lasers is preferred for efficient operation.