Silver-doped SrBi2Ta2O9 (Ag:SBT) ceramics were synthesized by solid state reactions. The reaction mechanism has been deduced based on the crystal defect chemistry. It involves the diffusion of Ag+ and O2− ions into the (Bi2O2)2+ layers between the perovskite-like units to recover the bismuth and oxygen vacancies, respectively, which were inherently present in SBT ceramics due to the volatilization of Bi2O3 at high temperatures. The Ag:SBT samples have been characterized by a variety of techniques: x-ray diffraction, dielectric and ferroelectric measurements, and impedance spectroscopy. Ag doping is found to significantly affect the structural and physical properties of SBT, including lattice parameters, Curie temperature, bulk conductivity, activation energy, and ferroelectricity. These effects have been interpreted based on the model of the recovery of oxygen and bismuth vacancies upon Ag doping. The effects of Ag diffusion should be taken into account when using Ag as electrode materials for the characterization of the electric properties of SBT and related materials.