Polycrystalline Na0.5Bi0.5TiO3 (NBT) ceramics were synthesized by using sol–gel and solid state reaction techniques with an average grain size of ≅240 nm and ≅14 μm respectively. Structural analysis confirmed the R3c phase-stabilization in both bulk and nano-NBT. The lattice strain analysis estimated by using W–H plot from the XRD profiles revealed the strain was compressive in NBT-nano. Phonon life times (τ) of Na/Bi–O, Ti–O and TiO6 phonon modes were decreased in NBT-nano due to the grain size effect. Microstructure of NBT-nano displayed an enormous rise in the number of grain boundaries than NBT-bulk. Ferroelectric loops became slanted in NBT-nano due to the multi-domain to mono-domain transformation. The mono-domain transition eased the domain reversal and switching, which in-turn lowered the Ec value in NBT-nano (i.e. Ec = 45 kV/cm). The clamping effect caused by grain size reduction in NBT-nano leads to reduced Pr value (Pr = 25.2 µC/cm2). The compressive strain developed in the crystal lattice of NBT-nano leads to an increase in Tm (i.e. 335 °C). The variation in diffusivity parameter (γ) and degree of correlation strength q(T) between the polar nano regions were found to be the cause for enhanced relaxor features in NBT-nano. © 2015, Springer Science+Business Media New York.