Vertically aligned nanocomposite thin films with ordered two phases, grown epitaxially on substrates, have attracted tremendous interest in the past decade. These unique nanostructured composite thin films with large vertical interfacial area, controllable vertical lattice strain, and defects provide an intriguing playground, allowing for the manipulation of a variety of functional properties of the materials via the interplay among strain, defect, and interface. This field has evolved from basic growth and characterization to functionality tuning as well as potential applications in energy conversion and information technology. Here, the remarkable progress achieved in vertically aligned nanocomposite thin films from a perspective of tuning functionalities through control of strain, defect, and interface is summarized. Vertically aligned nanocomposite (VAN) thin films with controllable vertical interface, vertical lattice strain, and defects have enabled tremendous research activities in a variety of complex oxides. The remarkable progress achieved in VAN thin films is reviewed from a perspective of tuning functionalities through control of strain, defect, and interface.