${\text{CoSb}}_{3\text{-}x}{\text{Te}}_x\left(x=0.05-0.3\right)$ skutterudite polycrystals with an average grain size of 160 nm were fabricated by mechanical alloying combined with spark plasma sintering. The variation of lattice parameter with Te content indicates that the solution limit of Te was $x=0.15$ , above which the impurity phases of Te, ${\text{CoTe}}_2$ , and ${\text{CoSb}}_2$ appeared, and the matrix cracked above $500°\text{C}$ . All samples behaved as degenerate semiconductors. The forbidden energy gap was estimated to be 0.047 eV from the temperature corresponding to the occurrence of intrinsic excitation, which is in good agreement with Singh’s theoretical calculation (0.05 eV) [D. J. Singh and W. E. Pickett, Phys. Rev. B 50, 11235 (1994)]. The ${\text{CoSb}}_{2.85}{\text{Te}}_{0.15}$ sample had the highest power factor and the lowest thermal conductivity, resulting in the highest thermoelectric figure of merit, $ZT=0.93$ at $547°\text{C}$ . The role of Te substitution in enhancing thermoelectric properties is discussed in relation to the bipolar diffusion mechanism.