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In this research, p-type BiSbTe/ZrO2 nanocomposite powders were fabricated by high-energy ball milling. Different weight percentages of ZrO2 (2, 4, and 6 wt. %) nanoparticles were incorporated into the bulk (BiSbTe) matrix by consolidation of as-synthesized nanocomposites (NCs) powder by spark plasma sintering at 673 K. The phase and existence of ZrO2 nano-inclusions was confirmed by X-ray diffraction and transmission electron microscopy-selected area electron diffraction analysis. The Seebeck coefficient of the BiSbTe/ZrO2 NCs was significantly improved (∼36% for 4 wt. % added NCs) by a decrease in the carrier concentration and energy filtering effect, whereas the thermal conductivity was much reduced via strong scattering of carriers/phonons. The peak thermoelectric figure-of-merit (1.34 ± 0.06) was obtained for BiSbTe into which 2 wt. % ZrO2 was dispersed, which was approximately 20% greater than that of the undispersed sample. The hardness of the nanocomposites was significantly improved (∼27%) due to grain-boundary hardening and a dispersion strengthening mechanism.