Enhancement of the figure of merit (ZT) of thermoelectric materials is the topic of current research in energy studies. We report an enhancement in the thermoelectric power (TEP) of thermally evaporated PbTe thin films by low energy Ag ion implantation. This implantation results in PbTe:Ag nanocomposites. Implantations were carried out at a 130 keV Ag ion beam with ion fluences of 3 × 1015, 1.5 × 1016, 3 × 1016, and 4.5 × 1016 ions/cm2. The atomic concentrations were determined using Rutherford backscattering and found to be 1 at. %, 5 at. %, 10 at. %, and 14 at. % in the implanted PbTe films. Scanning electron microscopy images show the presence of fine cracks on the surface of as-deposited PbTe thin films that get shortened and suppressed and finally disappear at higher fluences of Ag ion implantation. The TEP measurements, from 300 K to 400 K, show ∼25% enhancement in the Seebeck coefficient of the Ag ion implanted films in comparison to the pristine PbTe thin film. The synchrotron based high resolution X-ray diffraction and X-ray photoelectron spectroscopy investigations reveal the formation of Ag2Te in the surface layer after Ag ion implantation.