In this study, α-Bi2O3 and α-Fe2O3 powder mixtures experienced a novel mechano-thermal procedure, which includes high-energy ball milling followed by heat treatment, resulting in the successful synthesis of a BiFeO3-Fe2O3 nanocomposite. Simultaneous thermal analysis (STA) and X-ray diffraction (XRD) showed that the formation and characteristics of BiFeO3-Fe2O3 nanocomposite are greatly influenced by the milling process, heat-treatment temperature, and the α-Bi2O3:α-Fe2O3 molar ratio. X-ray photoelectron spectroscopy (XPS) spectra confirmed the presence of Bi, Fe, and O, indicating the formation of the BiFeO3 phase. Field emission scanning electron microscopy (FESEM) analysis showed the development of plate-like microstructures in the BiFeO3 phase with an average thickness of 88 nm. Diffuse reflectance spectroscopy (DRS) indicated that the 20 h-milled nanocomposite with a molar ratio of α-Bi2O3:α-Fe2O3 (1:3) exhibited the lowest band gap of 2.38 eV after heat treatment at 750 °C. The reduction in photoluminescence (PL) peaks and increase in photocurrent in the above sample suggested a decrease in charge carrier recombination rate, leading to high photocatalytic activity of 85 and 42% for methylene blue (MB) and methyl orange (MO) degradation, respectively. The effect of various pH levels on the photocatalytic activity of both dyes was examined, with MO degrading by 94% in an acidic environment after 300 min of visible light exposure, while MB experienced similar degradation in an alkaline setting. The kinetics and mechanism of photocatalytic degradation were extensively studied using the Langmuir-Hinshelwood (L-H) model, revealing the significant role of hydroxyl radicals in photodegradation. A Z-scheme mechanism for charge transfer in the nanocomposite was postulated, drawing upon radical scavenging and Mott-Schottky experiments. The prepared photocatalyst showed excellent stability and reusability following a cyclic experiment.