Ceramic pellets of Li-doped sodium–potassium niobate, (Na₀.₅₂₅K₀.₄₇₅)₁₋ᵧLiᵧNbO₃ (y = 0, 0.04, 0.05, 0.06, and 0.07 mol%), were synthesized using the conventional solid-state reaction technique followed by a two-step sintering process to achieve improved densification and phase stability. Sodium–potassium niobate (NKN)-based ceramics are considered promising lead-free piezoelectric materials, particularly near the morphotropic phase region, due to their enhanced dielectric and electromechanical properties. The incorporation of Li⁺ ions into the NKN lattice is expected to modify the crystal structure and influence polarization behavior through lattice distortion and compositional tuning. Phase formation and structural evolution were examined using X-ray diffraction (XRD), which confirmed the formation of a perovskite structure without detectable secondary phases within the studied composition range. A systematic shift in diffraction peaks with increasing lithium concentration indicates lattice modification and compositional sensitivity. Notably, a discontinuity in the peak-shift trend was observed at y = 0.05, suggesting anomalous structural behavior near this composition. Dielectric measurements carried out as a function of frequency revealed a strong dependence on lithium content. Among all investigated samples, the composition with y = 0.05 exhibited the highest dielectric constant and enhanced electrical conductivity. The observed enhancement in dielectric response is attributed to optimized lattice distortion and polarization mechanisms at this critical composition. These results highlight the significant role of Li substitution in tailoring the structural and dielectric properties of NKN ceramics near the morphotropic phase region, making them potential candidates for lead-free dielectric and piezoelectric device applications.