InP/SiO2 composite thin films have been deposited on hot substrates of slice of silica glass and polished silicon by a radio frequency magnetron co-sputtering technique, and annealing under several conditions. Detailed analysis of the composition of the films by X-ray photoelectron spectroscopy and Rutherford backscattering spectroscopy shows that the InP and SiO2 exist in normal stoichiometry as a whole. X-ray diffraction patterns and Raman spectra of the films conform the presence of InP nanocrystals in the composite films. Very small amounts of extra indium and In2O3 have been removed and pure InP/SiO2 nanocomposite films have been obtained by annealing at high temperature (520℃) in over-pressure of phosphorous vapor. Blue shifts of optical absorption spectra and great enhancement of optical nonlinearity of the films at room temperature have been observed.