Nanostructures of multiferroic materials have drawn increasing interest due to the enhanced magnetoelectric coupling and potential for next-generation multifunctional devices. Most of these structures are typically prepared by thin film evaporation approaches. Herein, however, we report a novel sol-gel-based process to synthesize epitaxial BaTiO(3)-CoFe(2)O(4) nanocomposite thin films via phase separation and enhanced heterogeneous nucleation. The magnetoelectric coupling effect is investigated by examining the temperature-dependent magnetization of the composite film, which manifests as a sharp and significant drop (>50%) of the magnetization at the vicinity of a BaTiO(3) ferroelectric phase transition. We propose that the phase transition in BaTiO(3) is mediated by the tensile strain due to intimate coupling to CoFe(2)O(4) phase, which has rarely been reported before. The significant coupling effect is attributed to the small substrate clamping, and the large areal distribution of intimate heteroepitaxial interfaces between the three-dimensionally distributed ferroelectric and magnetic nanostructured phases.