We report the structural and optical properties of x SnO2 -y Fe2 O3 nanocrystalline composite thin films. SnO2 and Fe2 O3 exhibit strong phase separation instability and their particle size and crystallinity are tunable by changing their composition and annealing temperature. The bandgap for these composites continuously increases from 2.3 to 3.89 eV. We discuss the increasing bandgap values in terms of the quantum confinement effect manifested by the decreasing size of Fe2 O3 crystallites. The method provides a generic approach for the tuning of the bandgap in nanocomposite systems. © 2008 American Institute of Physics.