Poly(methyl methacrylate) (PMMA)/indium tin oxide (ITO) nanocomposites were prepared by mechanical mixing and compression molding in order to study the properties and microstructure of the composites. The composites were examined by optical and scanning electron microscopy, impedance spectroscopy, and UV-VIS spectrophotometry. It was observed that upon compaction of the powders above the glass-transition temperature of the matrix, the PMMA transforms from spherical to polyhedral-shaped, and develops sharp edges and flat faces. The ITO nanoparticles do not penetrate the polymer particles, resulting in a novel segregated network microstructure. Excellent correlation between the electrical, optical, and microscopy data also provide good insight about the behavior of the filler as the content is increased in the nanocomposites. There is strong evidence that the ITO nanoparticles are extensively displaced during compaction as the PMMA powders become polyhedral-shaped. Our results indicate that percolation occurs due to the ITO forming a continuous network along the edges of the faceted PMMA particles. The ITO nanoparticles do not appear on the faces of the PMMA particles until after a percolation path has formed and a marked increase in electrical conductivity has occurred. This behavior significantly diverges from previous models for segregated network microstructures which proposed that percolation occurred as the result of limited displacement of the filler during compaction of the mixed powders.