Ba-filled skutterudite compounds, Ba_0.3Co₄Sb₁₂, with dispersed Ag nanoparticles have been synthesized by ball milling followed by hot pressing. The influence of Ag nanoparticles and their size distribution on electrical and thermal transport properties has been investigated in the temperature range from room temperature to 823 K. It was found that Ag nanoparticles in the Ba_0.3Co₄Sb₁₂ matrix drastically enhance the electric conductivity and slightly increase the Seebeck coefficient. Surprisingly, Ag nanoparticles do not alter the carrier density of Ag/Ba_0.3Co₄Sb₁₂ nanocomposites. This large improvement in the electrical conductivity as well as the corresponding power factor is assumed to come primarily from the enhanced mobility in Ag/Ba_0.3Co₄Sb₁₂ nanocomposites. In addition, a large reduction in thermal conductivity is achieved by grain size reduction resulting from ball milling processing and as a result of the embedded Ag nanoparticles that scatter a wider range of phonon frequencies. These concomitant effects result in an enhanced thermoelectric performance with the dimensionless figure of merit ZT some 30% higher in comparison to the parent Ba_0.3Co₄Sb₁₂. Moreover, we found it is advantageous to employ a wider size distribution of Ag nanoparticles to reduce the thermal conductivity to a large degree by enhancing phonon scattering. These observations demonstrate an exciting scientific opportunity to raise the figure-of-merit of filled skutterudites.