The effects of adding Eu3+, Dy3+, and Eu3+/Dy3+ rare-earth elements on the microstructural, optical and electrical properties of lead-free piezoelectric materials based on K0.5Na0.5NbO3 (KNN) were investigated. A series of fine powders were synthesized via a modified Pechini route utilizing citric acid. Relatively large amounts of rare-earth elements were successfully incorporated into the crystal lattice of KNN. A combination of X-ray diffraction, X-ray absorption spectroscopy, energy-dispersive X-ray and scanning electron microscopy were used to characterize the structure and chemical composition of the powders and sinters. XRD patterns indicated the formation of a single-phase orthorhombic structure in the co-doped sinter. X-ray absorption spectroscopy revealed the nominal 3+ valence states of Eu and Dy in KNN ceramic sinters. The Mott model and group symmetry theory were used to discuss the characteristics of Raman spectra obtained for the EuDy:KNN ceramics. The ceramics exhibited good dielectric permittivity (ε≃1300) and low dielectric loss (tan δ=0.03) in the temperature range of 170–240°C. The electrical properties of the ceramics showed that the basic mechanism of conduction and relaxation was thermal activation, and that small polaron hopping was responsible for charge carrying. The Eu3+ and Dy3+ ions displayed characteristic red and orange emissions in sinters when excited with light in the wide ultraviolet spectra range (380–420 nm).