Cellulose nanoparticles, dissolved in an ionic liquid,1-butyl-3-methyl imidazonium chloride, are reinforced into the poly vinyl alcohol (PVA) matrix by in-situ precipitation method. Nanocomposites are characterized by X-ray diffraction (XRD), Fourier transform infrared (FTIR), Field emission scanning electron microscopy (FESEM). XRD analysis shows significant changes in crystalline nature of PVA due to the incorporation of nano cellulose. Cellulose nanoparticles, having dimension around about 7-9 nm are observed in FESEM studies and are also confirmed by AFM analysis. The interaction of cellulose and PVA are explained by FTIR study. Recovered ionic liquid is confirmed by 1H-NMR study and reused for cellulose dissolution.