Defect engineering can effectively modulate the band structure of a thermoelectric (TE) material, thereby enhancing its power factor S2σ. Furthermore, residual stress engineering influences the film performance, especially in the planar technologies. For the TE Mg-doped CuCrO2-based materials, the limitations in achieving an outstanding figure of merit, ZT, arise from their characteristically low charge carrier mobility and high thermal conductivity. Herein, we propose a combination of defect engineering and stress engineering via heavy doping CuCr1-xMgxO2 with × = 0.15 at different deposition temperatures to overcome the aforementioned limitations. Combining the compressive residual stress with multiscale defects (point defects, grain boundaries, and nano-inclusions) significantly reduces the thermal conductivity (κ) to 0.44 W/mK. The σ of the films shows a remarkable enhancement because of point defects introduced via heavy doping. Notably, the compressive-stressed films exhibit higher ZT values, compared to the tensile-stressed films. As a result, an outstanding approximated ZT of 0.66 is observed in the compressive-stressed CuCr0.85Mg0.15O2 films, overcoming the limitations of its ZT value observed for the past two decades.