Nanocrystalline ferroelectric Pb 0.92Sm 0.08(Zr 0.53Ti 0.47) 0.98O 3 with high dielectric constant has been synthesized by mechanical alloying (high energy ball milling). The ferroelectric material exhibits novel behavior when its crystallite size falls below a critical length scale of 40 nm. We observed phenomena such as significant decrease in dielectric constant and phase transition from Tetragonal to Cubic structure on reduction in crystallite size below 40 nm. Copyright © 2009 American Scientific Publishers All rights reserved.