A thermoelectric device and method based on creating a structure of nanoclusters in a composite metal and insulator material by co-depositing the metal and insulator material and irradiating the composite material to create nanoclusters of metal within the composite material. In one variation, the composite material may be continuously deposited and concurrently irradiated. A further variation based on a multilayer structure having alternate layers of metal/material mixture. The alternate layers have differing metal content. The layer structure is irradiated with ionizing radiation to produce nanoclusters in the layers. The differing metal content serves to quench the nanoclusters to isolate nanoclusters along the radiation track. The result is a thermoelectric device with a high figure of merit. In one embodiment, the multilayer structure is fabricated and then irradiated with high energy radiation penetrating the entire layer structure. In another embodiment, layers are irradiated sequentially during fabrication using low energy radiation.