The techniques of size reduction and defect engineering have attracted great interest as an effective strategy for developing new and modified thermoelectric materials with high performance. Here, we investigated the thermoelectric properties of the Bi₂Te₃ system modified by Fermi level tuning through the methods of nanostructuring and doping. Band structure modification and Fermi level shift contribute to the better thermoelectric performance of the material. A minimum thermal conductivity of 0.72 W K⁻¹ was obtained at 440 K with a reduction of 50% as compared to the pristine sample. The improved transport properties along with considerably reduced thermal conductivity result in a two-fold improved figure of merit of 0.295 at 420 K for the nanostructured sample Bi_0.4Sb_1.6Te₃ over pristine Bi₂Te₃.