A new method for the formation of “smart” near-surface nanoscale composites has been developed. In this approach, small precipitates of active phases are embedded in the near-surface region of the material that is to be modified by a combination of ion implantation and thermal processing. The dispersion, concentration, and microstructure of the nanocrystals formed in the substrate material can be tailored through a careful choice of processing parameters – making this approach well suited to high-value-added, high-technology applications. The applicability of this approach to forming “smart” surfaces on otherwise inactive materials was established in the case of VO2 precipitates which were embedded in A12O3 single crystals to create a medium suitable for optical applications – including optical data storage. Most recently, this concept has been extended to the fabrication of magnetic-field-sensitive nanostructured surfaces by forming magnetostrictive precipitates of materials such as Ni or RFe2 (with R = Tm, Tb, Sm) that are embedded in various single-crystal-oxide hosts. These nanostructured, active surface composites have been characterized using XRD, RBS, TEM, and magneto-optical techniques.