The domain configuration of lead-free (K0.48Na0.52)(Nb0.96Sb0.04)O3–Bi0.50(Na0.82K0.18)0.50ZrO3 ceramics with rhombohedral–tetragonal morphotropic phase boundary, accounting for the high piezoelectric property and good thermal stability, were systematically studied. Short domain segments (before poling) and long domain stripes with wedge-shaped or furcated ends (after poling) were found to be typical domain configurations. The reduced elastic energy, lattice distortion, and internal stress, due to the coexistence of rhombohedral and tetragonal phases, result in much easier domain reorientation and domain wall motion, responsible for the high piezoelectric properties, being on the order of 460 pC/N, in which the extrinsic contribution from irreversible domain switching was estimated to be around 50% of the total piezoelectricity. Minor piezoelectric property variations (<6% over a temperature range from −50 to 100 °C) were observed as a function of temperature, showing a good thermal stability. In addition, nanodomains (50 ± 2 nm) were found to be assembled into domain stripes after poling, believed to benefit the high piezoelectric properties but not causing much thermal instability due to the small quantity.