An atomic-scale understanding of nanoscale precipitates in thermoelectric materials will help us explore their microstructure-property relationship, providing a strategy to optimize their thermoelectric properties. In thermoelectric β-SnTe, using advanced electron microscopy techniques, self-aligned nanoscale precipitates have been identified as γ-SnTe ultrathin nanosheets that induce anisotropic strain in the β-SnTe matrix. The interlayer van der Waals interactions occur across the interface of γ-SnTe ultrathin nanosheets and the β-SnTe matrix. The phase transition from γ-SnTe ultrathin nanosheets to β-SnTe can be accomplished by in situ electron-beam irradiation that lays out an approach for tuning the properties of SnTe-based thermoelectric materials.