Second phase and defect formation mechanism of (Bi0.5(Na1-xKx)0.5)TiO3 (BNKT100x) ceramics were investigated using electron microscopy, x-ray photoelectron spectroscope (XPS) and electrical properties measurements. Experimental results indicated that second phase formation induces Bi-rich regions and compositional inhomogeneity within matrix due to thermodynamic stability of potassium titanate. Ti valence transition for BNKT ceramics sintered in air might be ascribed to formation of the secondary phase, rather than simply attributed to volatilization of bismuth. Li substitution at A-site in BNKT ceramics suppresses formation of the second phase and Ti valence transition. Appropriate Li doped BNKT ceramics suppress oxygen vacancies and titanium valence transition, and therefore decrease the leakage current.