The Fe nanocrystals (NCs) were embedded into the epitaxial BaTiO 3 (BTO) matrix. According to optimize growth processes, a novel nanocomposite system was constructed, which consist of well epitaxial BTO layer and three-dimensional Fe NCs. Based on this, the different dielectric response in the regions of low temperature-high frequency and low frequency-high temperature were revealed by the contribution of hopping and interfacial polarizations, respectively. With the increased amount of Fe NCs, the obvious enhancement of low-frequency conductivity, middle frequency capacitance and high-frequency inductive effect was found. The metal NC embedding plays an important role in tuning the dielectric behaviors and ac conductivity of oxide dielectrics. This significant rectification effect in the wide-frequency ranges opens up a new direction for the designing of embedded nano-capacitors.