Composite materials result from combination of two or more materials benefiting from the favorable properties of each constituent. Especially when the filler material is in nanometer size, it offers extra degrees of freedom with which physical properties can be manipulated to obtain new functionalities. Such materials are known as nanocomposites. For instance the electrical conductivity of nanocomposite film depends on the inter particle separation and can be varied from insulating to metallic by metal volume fraction. This dependency can be utilized to design sensors in the field of gas sensing and strain sensing. Thus the aim of this thesis is preparation, characterization of polymer and ceramic nanocomposites through vapor phase deposition process and most importantly according to the application needed. The chosen preparation method allows one to control and vary the composition and filling factor which are of prime importance to tailor the functional properties. The focus of the thesis is the application of these nanocomposites as strain sensor, tunnel magnetoresistance and as a high frequency core material. A hybrid system was developed which uses quasi dimensional metal/polymer composite to monitor the magnetostriction through quantum tunneling. Magnetically induced strain in the magnetostrictive element is transferred to assembly of Au nanoparticle by mechanical coupling. This magnetically induced strain leads to changes in interparticle separation in the nanoparticle assembly, giving rise to a change in tunneling current between the metal nanoparticles thus enabling simple electrical read out of the strain. The functional layer should be able to transfer to any substrate easily. The presence of polymer is an added advantage when the substrate is conductive as is the case here. Further, ceramic (TiO2, SiO2) based magnetic nanocomposites where ferromagnetic alloy (FeCo) nanoparticles are embedded in ceramic matrix were developed. The composites were characterized in terms microstructure and magnetic properties with respect to metal volume fraction. The magnetization process is strongly related to metal volume fraction. Films show superparamagnetic behavior up to the percolation threshold suggesting presence of non interacting single domain superparamagnetic particles where as at higher volume fraction show hysteresis characters. Considerable room temperature tunnel magnetoresistance was observed below the percolation threshold. FeCo-SiO2 nanocomposite films deposited under external magnetic field show permeability of 100, ferromagnetic resonance frequency of 3 GHz and high quality factors at 1 GHz. One micron thick films were successfully integrated into toroidal microinductors.