The electrostrictive effect has some advantages over the piezoelectric effect, including temperature stability and hysteresis-free character. In the present work, we report the diffuse phase transitions and electrostrictive properties in lead-free Fe³⁺-doped 0.5Ba(Zr_0.2Ti_0.8)O₃-0.5(Ba_0.7Ca_0.3)TiO₃ (BZT-0.5BCT) ferroelectric ceramics. The doping concentration was set from 0.25 to 2 mol %. It is found that by introducing Fe³⁺ ion into BZT-0.5BCT, the temperature corresponding to permittivity maximum T_m was shifted toward lower temperature monotonically by 37 °C per mol % Fe³⁺ ion. Simultaneously, the phase transitions gradually changed from classical ferroelectric-to-paraelectric phase transitions into diffuse phase transitions with a weak relaxor characteristic. Purely electrostrictive responses with giant electrostrictive coefficient Q₃₃ between 0.04 and 0.05 m⁴/C² are observed from 25 to 100 °C for the compositions doped with 1–2 mol % Fe³⁺ ion. The Q₃₃ of Fe³⁺-doped BZT-0.5BCT ceramics is almost twice the Q₃₃ of other ferroelectric ceramics. These observations suggest that the present system can be considered as a potential lead-free material for the applications in electrostrictive area and that BT-based ferroelectric ceramics would have giant electrostrictive coefficient over other ferroelectric systems.