Abstract Multiferroic Bi1−xGdxFeO3 (0≤x≤0.15) samples were prepared using the solid-state reaction method. The influence of Gd substitution on the crystal, the electronic structure, and the magnetic properties of Bi1−xGdxFeO3 was studied. X-ray diffraction spectra show that Gd substitution changes the crystal structure of the Bi1−xGdxFeO3 system from a rhombohedral to an orthorhombic phase. According to Fe L-edge X-ray absorption spectra (XAS), Fe ions are found to be formally trivalent for any value of x in Bi1−xGdxFeO3. Based on a careful examination of Fe L and O K-edge XAS spectra, it was found that the enhanced magnetization which results from increasing Gd content is attributed to a reduced degree of hybridization between Fe 3d-O 2p orbitals. The crystal and electronic structures exhibit a causal relationship between themselves and demonstrated intrinsic mutual dependence in their corresponding variations.