The enhancement of functionality of perovskite ferroelectrics by local structure is one of current interests. By the Li-doping to KTa1−xNbxO3 (KTN), the large piezoelectric and electro-optic effects were reported. In order to give new insights into the mechanism of doping, the microscopic origin of the Fano resonance induced by the local structure was investigated in 5%Li-doped KTN single crystals by Raman scattering. The coupling between the continuum states and the transverse optical phonon near 196 cm−1 (Slater mode) caused a Fano resonance. In the vicinity of the cubic-tetragonal phase transition temperature, TC-T = 31 °C, the almost disappearance of the Fano resonance and the remarkable change of the central peak (CP) intensity were observed upon heating. The local symmetry of the polar nanoregions (PNRs), which was responsible for the symmetry breaking in the cubic phase, was determined to E(x, y) symmetry by the angular dependence of Raman scattering. The electric field induced the significant change in the intensity of both CP and Fano resonance. From these experimental results, it is concluded that the origin of the Fano resonance in Li-doped KTN crystals is the coupling between polarization fluctuations of PNRs and the Slater mode, both belong to the E(x, y) symmetry.