The physics of the spin-glass (SG) state, with magnetic moments (spins) frozen in random orientations, is one of the most intriguing problems in condensed matter physics. In LiHoxY(1-x)F4, the Ho3+ moments, which are well described by Ising spins with only discrete "up or down" directions, interact predominantly via the inherently frustrated magnetostatic dipole-dipole interactions. The random frustration causing the SG behavior originates from the random substitution of dipole-coupled Ho3+ by nonmagnetic Y3+. In this Letter, we provide compelling evidence from extensive computer simulations that a SG transition at nonzero temperature occurs in a realistic microscopic model of LiHoxY(1-x)F4. This resolves the long-standing, and still ongoing, controversy about the existence of a SG transition in disordered dipolar Ising systems.