In this article, we report the unique microstructural characteristics of YBa2Cu3O7-x (YBCO)/BaSnO3 (BSO) nanocomposite thin films on LaAlO3 (LAO) substrates. The BSO secondary phase grows as self-assembled vertically aligned nanopillars uniformly distributed in the superconducting YBCO matrix. Detailed microstructure and strain studies including x-ray diffraction, cross-section and plan-view transmission electron microscopy, and geometric phase analysis reveal that, as the BSO doping concentration varied from 2 mol% to 20 mol%, the nanopillar density increased from 0.26 × 1011/cm2 to 1.44 × 1011/cm2 while the diameter of the nanopillars remains relatively constant (7–8 nm in diameter). The strain state of the YBCO matrix is affected by both lateral and vertical lattice strains; while, the BSO lattice is strongly tuned by YBCO rather than the substrate. A high-density array of dislocations in the order of 1013/cm2 was observed along the vertical heterogeneous interfaces throughout the YBCO film thickness for all doping concentrations.