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α-MgAgSb is taken as the p-type leg material for recently focused Mg-based thermoelectric devices because of the high thermoelectric performance near room temperature. However, the thermoelectric performance of α-MgAgSb is inhibited by the existence of the Ag-rich second phase. The ordinary methods like carrier concentration optimization and minimizing lattice thermal conductivity were nearly invalid because of the extremely low doping level for heteroatoms and intrinsically low lattice thermal conductivity. The crystal structure of α-MgAgSb can be viewed as Ag atom filled in half distorted hexahedron in the distorted rock salt skeleton formed by the Mg–Sb sublattice. In this work, by replacing the smaller Mg in the sublattice with Pb, the volume of the distorted hexahedron is effectively expanded to accommodate Ag atoms and then lead to the re-dissolution of Ag-rich second phase in the matrix. In addition, as Ag is the main source of low-frequency phonons, the enhanced lattice anharmonicity by Pb doping leads to stronger scattering of phonons in the distorted hexahedron and results in 20% reduction of lattice thermal conductivity in the temperature range of 300–500 K. Finally, the figure of merit zT is enhanced by ∼40% in the whole temperature range, demonstrating that lattice management is a promising method for the optimization of α-MgAgSb materials. [ABSTRACT FROM AUTHOR]