A novel multifunctional behavior was observed by site specific cation substitution in NBT ceramics prepared by conventional solid state reaction technique. X-ray diffraction studies revealed very weak orthorhombic phase co-existence in co-substituted NBT system along with the primary R3c phase. Raman spectroscopy of NBT-GM ceramics reveals a substantial change in all phonon modes in terms of suppression and frequency shift, indicates that the substitution affects the nature of cation displacement, octahedral tilt and further the Bi-O, Ti-O hybridization. Reduced polarization value in NBT-GM ceramics with non-saturated hysteresis loops evidences the suppression of ferroelectricity. Temperature dependent magnetization measurements from R.T to 2.5K in NBTGM ceramics show the occurrence of spin-paramagnetic behavior. Susceptibility plots show some evidence for weak AFM interaction between Mn4+ ions at low temperatures below 30K. UV-Vis spectroscopy measurements reveal the indirect transition allowed band gap nature for both NBT and NBT-GM ceramics with a slight increase in band gap value for NBT-GM ceramics. Photoluminescence measurements show a strong blue emission at ∼390nm (3.18 eV) in Gd-Mn substituted NBT system, which corresponds to the radiative transition from 4 T 1g → 4 A 2g energy levels of Mn4+-ions. © 2013 The Korean Physical Society.