"It's a huge game," the former Gloucester Academy boss said. "It will be the biggest game of our season because it's make or break in terms of our Heineken Cup campaign. The result will tell us whether the final match against Castres Olympique is a meaningful game or not."
The two sides are developing into arch-rivals, with neither team giving an inch in their past two meetings. The Celtic League-leading Ospreys were unlucky to lose 18-20 in the second-round Heineken Cup match, before taking Munster to the wire in a Celtic League match in December, losing 9-13.
"We know a hell of a lot about them and they know a hell of a lot about us," Holley said. "The two sides are not very far apart. We know how to beat them - we just have to execute it on the day.
"But Munster are such a good side, they're aware of where they're vulnerable and they have the ability to adapt during a game.
"It's up to us to stop them getting into a position to score. If we can do that, we've got game-breakers who can destroy any defence."
Winger Shane Williams carved the Llanelli Scarlets to pieces in their Boxing Day derby, while centre Gavin Henson is realising the huge potential he showed when he was named the 2001 World Youth Player of the Year. And with Duncan Jones being recognised as one of the best loosehead props in the world, the Ospreys have class across the field.
"We all saw on Boxing Day what Shane can do, and we'll see more of it," Holley said. "We're trying to manipulate positions where we can get Shane into mis-matches. He's coming in as first or second receiver and he's so hard to stop from that position. We have got world-class players across the park."
Matches between the two sides haven't been without controversy, with red cards and citings dominating headlines in the past few months.
"We do have a healthy respect for each other," he said. "The niggle evolves from how tight the games are. There are a lot of mini-matches between world-class players out there which tend to erupt sometimes."
The Ospreys management and players know all about Munster's daunting home record in the Heineken Cup, but Holley just shrugs his shoulders.
"Records are there to be broken," he said. "We're well aware of what a threat they are at home and we're well aware of the fact that they are hot favourites.
"I remember going to Munster with Gloucester last season and knowing we could afford to lose by 10 points and still top the Pool. They ended up beating us by more than 20.
"Munster are expected to qualify from this Pool, so it's up to us to go over there and give it everything we've got."