The new spinel ferrite has garnered significant attention and has piqued the broadest interest among scientists due to its versatile and promising features, as well as its wide range of applications. In this study, we outline the process of synthesizing nano-sized Li–Cr ferrite powder, which exhibits remarkable dielectric relaxor activity when exposed to elevated temperatures. The study primarily focuses on investigating the structural, electrical, and optical properties of these Li–Cr ferrite particles. X-ray diffraction measurements confirmed the well-arranged inverse-cubic spinel structure of the material. The sample’s nanostructural properties were examined using scanning electron microscopy. The sample’s well-organized inverse-cubic spinel structure was confirmed using Fourier transform infrared spectroscopy examinations. The optical properties of our sample, as measured by UV–Visible spectroscopy, revealed a bandgap value of 2.6 eV makes it interesting for optoelectronic applications. The investigation focused on dielectric relaxation and electrical characteristics using impedance spectroscopy. It was shown that the AC conductivity follows Jonscher’s law, and the Non-overlapping Small-Polaron Tunneling model was developed to elucidate the conduction mechanism. The impedance spectra’s Nyquist plot confirmed the presence of grain boundary relaxation in the temperature ranges of 300–370 K and 560–660 K. Additionally, the interface, consisting of both the grain boundary and electrode effect, had a substantial influence between 380 and 550 K. An appreciable value for the temperature coefficient of resistance is observed. The results obtained demonstrate that the synthesized powder is well-suited for utilization in high-energy storage, low-temperature co-fired ceramics technology and bolometer applications.