This paper presents a Raman spectroscopic study of compositional-change-induced structure variation and of the related mechanism of Mg doping in LiSbO3 (LS)-modified (K0.5Na0.5)NbO3 (KNN) ceramics. With increasing LS content from 0 to 0.06, a discontinuous shift towards higher wavenumbers was found for the band position of the A1g(v1) stretching mode of KNN, accompanied by a clearly nonlinear broadening of this band and a decrease in its intensity. Such morphological changes in the Raman spectrum result from two factors: (i) changes in polarizability/binding strength of the O–Nb–O vibration upon incorporation of Li ions in the KNN perovskitic structure and (ii) a polymorphic phase transition (PPT) from orthorhombic to tetragonal (O → T) phase at x > 0.04. Upon increasing the amount, w, of Mg dopant incorporated into the (1-x)KNN–xLS ceramic structure, the intensity of the Raman bands are enhanced, while the peak position and the full width at half maximum of the A1g(v1) mode was found to experience a clear dependence on both w and x. Raman characterization revealed that the mechanism of Mg doping is strongly correlated with the concentration of Li in the perovskite structure: Mg2+ ions will preferentially replace Li+ ions for low Mg doping while replace K/Na ions for higher doping of Mg. The PPT O → T was also found to be altered by the introduction of Mg and the critical value of LS concentration, xO−T, for incipient O → T transition in the KNN–xLS–wMT system was strongly dependent on Mg content, with xO → T being roughly equal to 0.04 + 2w, for the case of dilute Mg alloying.