Thin films of CaF2 containing layers of Si nanocrystals were grown epitaxially on Si(111) substrates by MBE. When Si is deposited epitaxially on CaF2 it forms islands and, by choosing appropriate growth conditions, a composite of Si nanocrystals embedded in a CaF2 host crystal is obtained which we have observed with TEM. We varied the effective Si concentration in the composite region from 1% to 25%. The CaF2 could be grown with high crystal quality as demonstrated by ion channeling results which gave Ca xmin's as low as 4.7%. Raman spectra of the CaF2 containing Si nanocrystallites showed significant shifts toward lower energies. EUipsometry measurements were performed on a number of samples over a range of effective Si concentrations and Maxwell-Garnett effective medium theory was used to fit the data. A key technological advantage to this approach is that the epitaxial Si/CaF2 composite material is readily integrable into VLSI processing.