The effects of lithium doping on the electrical properties and ageing effect of ZnSnO (ZTO) thin films fabricated using a sol–gel process were investigated. As the Li content increased from 0 to 15 at%, the saturation mobility increased until 3 at% of Li and then decreased. The sub-threshold swing and on/off ratio were improved with the increase in Li content. In addition, Li (3 at%)–ZTO showed the smallest VTH change of 2.52 V among the thin film transistors (TFTs) in a positive bias stress (PBS) test. To observe the influence of Li on the ageing effect of TFTs, un-passivated Li–ZTO TFTs were stored under ambient conditions for 120 days. As a result of comparing the electrical characteristics of Li–ZTO TFTs after different durations of air exposure, the on/off ratio and sub-threshold swing of the Li (7 at%)–ZTO sample were almost unchanged when compared to those of ZTO. An x-ray photoelectron spectroscopy analysis of the O 1s core level showed that the relative area of oxygen vacancies (VO) decreased from 27.2 to 19.6% as the Li content increased from 0 to 15 at%. A spectroscopic ellipsometer analysis showed that Li (3 at%)–ZTO had the smallest optical band gap of 3.68 eV. From the result of the band alignment, it was confirmed that the Fermi level (EF) of Li (3 at%)–ZTO was located at the closest position to the conduction band minimum. Despite the reduction of the oxygen vacancy, the reason for the increasing electron concentration was due to the Li atom being preferentially located in the interstitial site, which released the free electron in the ZnO matrix. As a result, Li (3 at%)–ZTO showed improved electrical properties in the saturation mobility and PBS with stability under an ambient environment.