Display omitted •The new polyol sol–gel method for synthesis of new Y2O3@SmS compound with a core–shell nanostructure was reported for the first time.•It was found to be a promising value of Seebeck coefficient in comparison with other thermoelectric materials based on the rare earth elements.•The obtained results demonstrated the correlation between the Seebeck coefficient, the real structure and the internal microstructure changes for Y2O3@SmS composite.•The composites based on both the rare earth monosulfide and oxide were considered as a promising thermoelectric materials. The Y2O3@SmS composite with a core–shell nanostructure was synthesized using the polyol sol–gel method. For the first time the oxide powder Y2O3@Sm2O3 precursor was obtained from Y2O3 and Sm(acac)3 solutions in diatomic alcohol ethylene glycol C2H4(OH)2 by the precipitation of urea (NH2)2CO. Next, the precursor was heated to 633 K in the sulfidation atmosphere and annealed at 1423 K to obtain the final Y2O3@SmS composite. It was found that Y2O3@SmS compound contains a small amount of Sm2S3 impurity phase due to the diffusion process of the sulfur atoms of SmS2 phase to the sample surface, followed by a transition of SmS2 to Sm2S3 phase. The short-range order was analyzed using both Raman and XPS spectroscopy. The obtained data showed that Y2O3@SmS composite has a core–shell structure. Y2O3 phase was considered as a core, and the SmS phase – as the shell. Using the SEM and HRTEM data it was found that synthesized sample contained a significant amount of the core–shell nanoparticles with the average size of ∼ 200 nm. The Seebeck coefficient was of –40 µV/K at 430 K. The obtained value was two times greater compared to SmS@Y2O2S and Y2O2S@SmS core–shell compounds studied previously.