(K0.5Na0.5)NbO3-xFe2O3 perovskite ferroelectric ceramics (x = 0, 0.01, and 0.05) were prepared using a conventional solid-state reaction method. Structural and dielectric features of the as-prepared ceramics show the phases of the materials changed from orthorhombic to tetragonal with an increase in x, in particular the coexistence of the orthorhombic and tetragonal phases gives rise to the enhanced ferroelectric properties for x = 0.01. Bandgap (Eg) modulation was achieved in the Fe2O3 doped KNN ceramics, the Eg exhibiting a drastic decrease as the doping content increases in experiment that the Eg = 2.886, 2.232 and 2.061 eV when x = 0, 0.01 and 0.05, and the CASTEP calculation shown the similar trend, indicating that the materials exhibit a higher performance with the absorption in visible light. Moreover, magnetic switching corresponding to a diamagnetic-ferromagnetic transformation was observed.