Thermoelectric coolers (TEC) can produce a cooling effect (in refrigerator mode) or a heating effect (in heat pump mode) using electrical energy input. Performance characteristics of typical TECs are poor when compared to the traditional cooling system (e.g., a vapor compression system). However, nanostructuring of thermoelectric (TE) materials can generate high-performance TE materials (e.g., high Seebeck coefficient, low thermal conductivity, and high electrical conductivity), and such materials show the promise to improve the performance of TEC. The main objective of this paper is to investigate the effect of nanocomposite TE materials and surface to surrounding convection heat transfer on the thermal performance of TEC. The mathematical model developed in this paper includes Fourier heat conduction, Joule heat, Seebeck effect, Peltier effect, and Thomson effect. This model also includes temperature-dependent transport properties. Governing transport equations are solved numerically using the finite element method to identify temperature and electrical potential distributions and to calculate heat absorbed and the coefficient of performance (COP). Heat absorbed and COP are also calculated using a simplified 1D analytical solution and compared with numerically obtained results. An optimum electric current is also calculated for maximum heat absorption rate and maximum COP for fixed geometric dimensions and variable convection heat transfer coefficients. An Increase in the convection heat transfer coefficient increases the optimum electric current required for maximum heat absorption rate and maximum COP. For the materials considered, the results show that COP of TEC can be increased by approximately 13 ± 1% if nanostructured TE materials are used instead of the conventional TE materials.