Low dimensional antiferromagnetic systems, such as nanoparticles, are known to exhibit weak ferromagnetic behavior due to the uncompensated surface spins. In this report, we present a detailed magnetic study of LaFeO3/NiO nanocomposite, synthesized by propylene glycol gel method. The X-ray diffraction (XRD) based analyses, in combination with transmission electron microscopy (TEM), confirms 50:50 ratio composite with ~35–40 nm size particles. Owing to the high Néel temperatures (TN) of LaFeO3 and NiO, significant exchange bias (EB) and vertical magnetization shift (VMS) have been observed in the nanocomposite at room temperature. These features are attributed to the exchange interaction at the interface between the core and shell of the nanoparticles that are homogeneously dispersed in the nanocomposite. In our studies, the EB field and the VMS attains a value as high as 2050 Oe & 1.8 × 10-1 emu/g at 5 K and 75 Oe & 1.7 × 10-2 emu/g at 300 K, respectively. The thermoremanent magnetization (TRM) and isothermoremanent magnetization (IRM) analyses are done to identify the two-dimensional (2D) diluted antiferromagnet (DAFF) behavior of the surface shell of nanoparticles. We propose a phenomenological antiferromagnetic-(2D-DAFF)-antiferromagnetic magnetic structure model, to explain all the rich features and the observed magnetic properties of this nanocomposite.