Nanocomposites of poly(vinyl alcohol) (PVA) reinforced with bacterial cellulose (BC) were bioproduced by Gluconacetobacter genus bacteria. BC was grown from a culture medium modified with water-soluble PVA to allow in situ assembly and production of a novel nanocomposite that displayed synergistic property contributions from the individual components. Chemical crosslinking with glyoxal was performed to avoid the loss of PVA matrix during purification steps and to improve the functional properties of composite films. Reinforcement with BC at 0.6, 6 and 14 wt% content yielded nanocomposites with excellent mechanical, thermal and dimensional properties as well as moisture stability. Young's modulus and strength at break increased markedly with the reinforcing BC: relative to the control sample (in absence of BC), increases of 15, 165 and 680 % were determined for nanocomposites with 0.6, 6 and 14 % BC loading, respectively. The corresponding increase in tensile strengths at yield were 1, 12 and 40 %, respectively. The results indicate an exceptional reinforcing effect by the three-dimensional network structure formed by the BC upon biosynthesis embedded in the PVA matrix and also suggest a large percolation within the matrix. Bonding (mainly hydrogen bonding) and chemical crosslinking between the reinforcing phase and matrix were the main contributions to the properties of the nanocomposite.