Ni nanoclusters in silica matrix have been synthesized via sol–gel process for different percentage of Ni in the matrix. Transmission electron microscopic studies showed that the particle size of nickel was in the range 6–8.5nm for a variation of Ni content in the silica matrix 5–15%. Selected area electron diffraction patterns confirmed that these nanoparticles are cubic Ni and XRD studies of the composite powder also supported the presence of metallic Ni. It was observed that with the increase of nickel percentage in the silica matrix, the particle size increased, and stress decreased. ac conductivity, dielectric constant and complex permittivity spectrum have been studied over a wide range of frequency for different percentage of Ni content in the samples at room temperature. ac conductivity (σ ac ) measurements indicated σ ac increased in the lower frequency region (below 12–14kHz), but becomes nearly constant in the high frequency range. In the Cole–Cole plot two semicircular arcs appeared which indicated polydispersive nature of the dielectric properties of the Ni–silica nanocomposite. It was also observed that the dielectric properties of the Ni–silica nanocomposite not only depended on frequency but also changes with the grain size.