A new lead-free solid solution of Ca_1−x(LiDy)_x/2Bi₄Ti₄O₁₅ has been developed and prepared by a conventional solid state reaction method. The partial substitution of (Li_0.5Dy_0.5)²⁺ for Ca²⁺ ions in CaBi₄Ti₄O₁₅ leads to great multi-improvement in the ferroelectricity/piezoelectricity, luminescence and thermal stability of the materials. All the ceramics possess a bismuth-layer structure; and the crystal structure of the ceramics is transformed from four layer bismuth-layer structure to a three layer structure with x increasing. For the ceramic with x = 0.2, high resistivity (R = 3.0 × 10¹¹ Ω cm), good piezoelectricity (d₃₃ = 10.5 pC N⁻¹), strong ferroelectricity (P_r = 9.92 μC cm⁻²) and improved luminescence are simultaneously obtained. These enhancements in multifunctional properties are greatly attributed to the contribution of (Li_0.5Dy_0.5)²⁺ in the ceramics. Under the excitation of 451 nm light, the (LiDy)²⁺-modified ceramics exhibit bright blue and yellow emission peaks centered at 484 nm and 574 nm, corresponding to the transition of the ⁴F_9/2 → ⁶H_15/2 and ⁴F_9/2 → ⁶H_13/2 levels of Dy³⁺ ions, respectively. Interestingly, excellent temperature stability of the ferroelectricity/piezoelectricity and luminescence is also observed in the ceramic with x = 0.2. These results show that Ca_1−x(LiDy)_x/2Bi₄Ti₄O₁₅ multifunctional ceramics may have promising potential in high temperature multifunctional devices.