Fabrication of a new nanocomposite architecture comprising small weight percentage (< 0.5 wt%) of Toluidine Blue O dye as a filler in host polymer poly(vinyl alcohol) (PVA) via a simple route based on solution-casting is presented. Their microstructure, electrical, linear optical and third-order nonlinear optical properties are introduced here. These samples were characterized as nanocomposites, with dye chromophore uniformly distributed in the molecular chains of the polymer PVA. The effect of fluorescence quenching due to H-aggregates is also discussed. Low threshold third order nonlinear optical response of these nanocomposite film samples was carried out employing the Z-scan technique. With increase in intensity, a transition from reverse saturable absorption to saturable absorption was observed in the nanocomposite films, on excitation with continuous wave (CW) He-Ne laser light. The nonlinear refraction based optical limiting of CW laser light is demonstrated using aperture limited geometry. Compared with other reported results, the estimated values of the nonlinear refractive index (n 2), nonlinear absorption coefficients (β), third order nonlinear susceptibility (χ (3)) and limiting threshold are much better. These results thus possess tremendous scope towards future fabrication of optoelectronic and photonic devices such as organic/polymer light-emitting devices, dye-sensitized solar cells, optical limiters, optical switches, etc.