The effect of Bi (semimetal) nanoinclusions in nanostructured Bi2Te3 matrices is investigated. Bismuth nanoparticles synthesized by a low temperature solvothermal method are incorporated into Bi2Te3 matrix phases, synthesized by planetary ball milling. High density pellets of the Bi nanoparticle/Bi2Te3 nanocomposites are created by hot pressing the powders at 200 °C and 100 MPa. The effect of different volume fractions (0–7%) of Bi semimetal nanoparticles on the Seebeck coefficient, electrical conductivity, thermal conductivity and carrier concentration is reported. Our results show that the incorporation of semimetal nanoparticles results in a reduction in the lattice thermal conductivity in all the samples. A significant enhancement in power factor is observed for Bi nanoparticle volume fraction of 5% and 7%. We show that it is possible to reduce the lattice thermal conductivity and increase the power factor resulting in an increase in figure of merit by a factor of 2 (from ZT = 0.2 to 0.4). Seebeck coefficient and electrical conductivity as a function of carrier concentration data are consistent with the electron filtering effect, where low-energy electrons are preferentially scattered by the barrier potentials set up at the semimetal nanoparticle/semiconductor interfaces.