We have studied nucleation and growth of Dy islands on the basal plane of graphite at 300 K using scanning tunneling microscopy, density functional theory (DFT) in a form that includes van der Waals interactions, and analytic theory. The interaction of atomic Dy with graphite is strong, while the diffusion barrier is small. Experiment shows that at 300 K, the density of nucleated islands is close to the value predicted for homogeneous nucleation, using critical nucleus size of 1 and the DFT-derived diffusion barrier. Homogeneous nucleation is also supported by the monomodal shape of the island size distributions. Comparison with the published island density of Dy on grapheneshows that the value is about two orders of magnitude smaller on graphite,which can be attributed to more effective charge screening in graphite. The base of each island is 3 atomic layers high and atomically ordered, forming a coincidence lattice with the graphite. Islands resist coalescence, probably due to multiple rotational orientations associated with the coincidence lattice. Upper levels grow as discernible single-atom layers. Analysis of the level populations reveals significant downward interlayer transport, which facilitates growth of the base. This island shape is metastable, since more compact three-dimensional islands form at elevated growth temperature.