Copper telluride belongs to the “Phonon Liquid Electron Crystal” (PLEC) class of materials owing to its mobile Cu ions which migrate easily inside the crystal lattice. The mobile copper ions scatter phonons and lead to low thermal conductivity making it a suitable choice as a thermoelectric material. However, the formation of copper vacancies results in high hole carrier concentration (∼1021 cm−3) leading to poor Seebeck coefficient and degrades its overall thermoelectric efficiency. In this work, we aim at improving the thermoelectric transport properties of Cu2Te by alloying with Fe. The alloys of Cu2-xFexTe (where x varies from 0 to 0.06) were synthesized via solid-state synthesis followed by compaction in an induction hot press system. The formation of the trigonal phase (space group P3m1) of Cu2Te and the solubility of Fe ∼ x = 0.05 in Cu2-xFexTe is confirmed by means of X-ray Diffraction and backscattered electron micrographs. The decrease in electrical conductivity and the Hall carrier concentration and increase in the Seebeck coefficient with increasing Fe content signifies the compensation of holes by the electrons contributed from the trivalent Fe. The specific heat capacities of the Fe substituted samples were higher than the Dulong Petit limit of 3NkB, which implies that “liquid-like” behaviour of the Cu ions has been suppressed. This is because the Fe atoms act as barriers to the Cu ion diffusion. Due to the maximum power factor (∼0.47 mW m−1 K−2) and minimum thermal conductivity (∼2.19 W m−1 K−1), the maximum figure of merit of ∼0.16 at 750 K was obtained for the sample Fe0.03. It is hypothesized that the substitution of Fe not only helped to control the high carrier concentration but also restricted the cationic diffusion in Cu2Te. Hence, the present study points to a possibility of synergistically improving the thermoelectric properties as well as suppressing the ionic diffusivity in PLEC materials.