The aqueous solution cast method was used to create the biodegradable polymer nanocomposite (PNC) films from a blend of poly (vinyl alcohol) PVA and poly (vinyl pyrrolidone) PVP (70/30 wt %) and Fe2O3 nanoparticles (NPs). These PNC films were characterized using X-ray diffraction, scanning electron microscopy SEM, Fourier transform infrared spectroscopy FTIR, and ultraviolet-visible spectroscopy. XRD and FTIR results indicate that Fe+ 3 NPs interact with the host polymer. Optical, electrical, mechanical, and radiation shielding measurements were performed on the PNC films. From the optical measurements, the indirect optical band gap drops from 4.86 eV for the pure blend to 4.26 eV at the greatest NPs concentration. Optical limiting characterization shows that the output power of He-Ne and solid-state green laser beams is reduced from 22.98 to 3.6 mW and 6.59 to 1.4 mW, respectively, when the Fe2O3 NPs content in the blend matrix is increased to 6 wt %. The NGCal software was utilized to calculate nuclear radiation shielding properties. The findings demonstrated that when the concentration of Fe2O3 rose, the PNC films half-value layer and mean free path decreased. Mechanical measurements demonstrate that increasing the Fe2O3 content significantly improves nanocomposite films’ yield and tensile strength. Tensile strength is measured at 27.03 MPa for the composite film containing 6 wt % Fe2O3, which is significantly higher than the 8.66 MPa of the pure (PVA-PVP) film. Compared to the other samples under examination, the 6 wt % Fe2O3 sample yielded the best results (based on the analyzed optical, electrical, mechanical, and radiation shielding properties).