We present experimental evidence of enhancement of thermoelectric properties in tellurium (Te) nanoparticle-embedded bismuth antimony telluride (BiSbTe) alloys. Bi0.5Sb1.5Te3 films with a high density of Te particles of 10–20 nm size were prepared by growth of alternating multilayers of ultrathin Te and Bi0.5Sb1.5Te3. As the amount of Te nanoinclusions increased up to ∼15%, the Seebeck coefficient and thermoelectric power factor were increased. Based on the concept of band bending at heterointerfaces as a carrier energy filter, the energy relaxation calculation was made to confirm that the Te nanoinclusions result in a carrier energy filtering effect in p-type bismuth antimony telluride. In addition, thermal conductivities were reduced in the Te-embedded samples, permitting possible further enhancement of the thermoelectric figure of merit. The advantages of Te nanoinclusions in p-type Bi0.5Sb1.5Te3alloys on thermoelectric performance are experimentally realized by both electron- and phonon scattering.