Among various thermoelectric (TE) materials, iron disilicide (FeSi2) has relatively low cost and non-toxic characteristics which make it appropriate for large scale applications. To enhance the dimensionless figure of merit (ZT) of this material, a composite of FeSi2-Si0.8Ge0.2 with high fraction of alpha-FeSi2 was prepared by mechanical alloying and sintering. The process was followed by thermal annealing to transform alpha to beta phase FeSi2 through a slow peritectoid reaction (several hours). The thermoelectric properties were significantly improved upon the completion of the phase transformation. At temperatures above 900 degrees C, FeSi2 component rapidly changed from beta to alpha phase (several minutes) leading to sudden increase of the thermal conductivity. For comparison, the thermoelectric alloy of beta-FeSi2 was prepared through a similar process. The effect of sintering conditions and annealing time were studied and a comparison was drawn between the thermoelectric properties of beta-FeSi2 and FeSi2-Si0.8Ge0.2 nanocomposite. Overall, (FeSi2)(0.75)(Si0.8Ge0.2)(0.25) showed 170% enhancement in ZT compared with beta-FeSi2 making it suitable for medium to high temperature applications (500 degrees C -850 degrees C). (C) 2014 Elsevier Ltd. All rights reserved.