The work reported here deals with fabricating iron oxide nanoparticles incorporated polyvinyl alcohol nanocomposite films via the solution‐casting green route, characterized using various characterization techniques. X‐ray diffraction analysis shows interaction of nanoparticles with the polyvinyl alcohol matrix, scanning electron microscopy shows surface morphology of crack‐free films, energy dispersive spectroscopy indicates elemental purity, tensiometer analysis shows changing behavior of hydrophilic to hydrophobic, thermogravimetric analysis shows improved thermal stability, ultraviolet‐visible spectroscopy shows tunable optical properties, and frequency response analysis shows improved electrical properties. A small incorporation (1 wt. %) of iron oxide nanoparticles has induced significant alternations in structural, wetting, thermal, optical, and electrical properties of the polyvinyl alcohol‐based nanocomposite films. Results showed notable changes in the structural phases, water contact angle (39.5° to 97.7°), optical absorption edge (5.12 eV to 4.84 eV), indirect band gap (4.99 eV to 4.68 eV), direct bandgap (5.41 eV to 5.21 eV), and band tail (0.57 eV to 0.89 eV) from native polyvinyl alcohol to polyvinyl alcohol/iron oxide nanocomposite films. Enhancements were observed in refractive indices, optical conductivity, optical dielectric loss, thermal stability, dielectric constant, and dielectric loss on incorporating iron oxide nanoparticles into the polyvinyl alcohol matrix. The fabricated nanocomposite films might be a potential material for optoelectronic and microelectronics applications.