Balancing electron and phonon scattering is crucial for enhancing the thermoelectric (TE) performance of materials. Herein, the TE performance of Mg-alloyed SnTe was significantly enhanced by managing lattice defects. Formation of Sn vacancies in Mg-alloyed SnTe was suppressed via Sn-compensation, leading to 23% higher carrier mobility and 29% higher power factor (PF) of SnMgTe than those of SnBiMgTe with Bi-doping. Transmission electron microscopy analysis confirmed the formation of dense dislocation arrays in SnBiMgTe, resulting in an ultra-low lattice thermal conductivity (κ = 0.34 W mK) at 823 K. A combination of Sn-compensation and Bi-doping in SnBiMgTe resulted in high PF and low κ, simultaneously, owing to the balanced scatterings of electron and phonon. Furthermore, carrier concentration was optimised, with a high figure of merit (ZT ∼1.3) achieved at 873 K, ∼50% higher than that obtained by applying either Sn-compensation or Bi-doping individually.