Rare earth ion modification has been widely used to improve the electrical properties of ferro/piezoelectric materials. In this work, Lu³⁺ doped lead-free ferroelectric ceramics of 0.67BiFe_{1 - x} Lu _x O₃-0.33BaTiO₃ (BF-BT-xLu, x = 0, 0.005, 0.008, 0.010, 0.012, 0.015, 0.020, 0.030) were prepared by using a conventional high-temperature solid-state reaction method. The results of XRD powder diffraction showed that the introduction of Lu³⁺ ions did not cause significant change of the crystal structure for the Lu³⁺ doped lead-free ferroelectric ceramics, and of which all the components of ceramics are retained in the morphotropic phase boundary (MPB) region, where tetragonal and rhombohedral perovskite structures coexisted. Microscopic morphology analysis shows that all ceramics were well sintered and have high relative density. By analyzing and comparing the changes in iron ion valence and oxygen vacancies, it can be determined that the incorporation of appropriate amount of Lu³⁺ ions can effectively hinder the transformation of Fe³⁺ ions to Fe²⁺ ions, thereby reducing the leakage current in the BF-BT-xLu ceramics, therewith, improving its electrical performance. Pure BF-BT exhibits P-E hysteresis loops of typical ferroelectrics, with remnant polarization (P_r) = 26.47 μC/cm², coercive field (E_c) = 30.45 kV/cm. After moderate Lu³⁺ modification, the ferroelectric properties of the BF-BT system were improved, with P_r = 28.66 μC/cm², E_c = 28.12 kV/cm for the BF-BT-0.015Lu. By 80 kV/cm at room temperature, the electric field-strain S of BF-BT-0.01Lu is 0.328%, and the high-field piezoelectric coefficient d{}_{\mathrm{33}}^{\mathrm{*}} is 410 pm/V. The present study expands the application of rare earth ions in the field of ferroelectric materials and provides an example for further designing high-performance BF-BT lead-free ferroelectrics.