Rare-earth-doped yttrium aluminum garnet (YAG:RE) phosphors have good photoluminescence (PL) properties and are widely used in light-emitting diodes. However, the RE elements used in these phosphors are expensive and in short supply. It is therefore important to develop phosphors that contain smaller amounts of RE materials. One strategy is to produce nanocomposite phosphors in which a cheaper and more readily available material is used as a matrix for an RE oxide. In this study, we produced a YAG:Ce/SiO2 nanocomposite using a sol–gel method; poly(ethylene glycol) and urea were added to promote micelle formation and agglomeration, respectively. The nanocomposites were characterized using X-ray diffraction, scanning and transmission electron microscopies (TEM), and energy-dispersive X-ray spectroscopy. We determined the concentration of SiO2 that provided maximum PL enhancement, and used geometrical models as well as the characterization results to propose an explanation for this enhancement. Our results showed that an SiO2 concentration of 10 vol% provided a PL intensity 120% that of pure YAG:Ce. TEM analysis showed that SiO2 nanoparticles covered the voids between the single grain boundaries of the YAG:Ce crystals, thereby inhibiting light scattering, resulting in enhanced PL. This method will be useful for large-scale synthesis of low-RE, high-PL phosphors.