Single-phase nanocrystalline materials undergo inhomogeneous plastic deformation under loading at room temperature, which results in a very limited plastic strain (smaller than 0-3%). The materials therefore display low ductility, leading to catastrophic failure, which severely restricts their application. Here, we present a new in situ-formed nanostructured matrix/ductile dendritic phase composite microstructure for Ti-base alloys, which exhibits up to 14.5% compressive plastic strain at room temperature. The new composite microstructure was synthesized on the basis of the appropriate choice of composition, and by using well-controlled solidification conditions. Deformation occurs partially through dislocation movement in dendrites, and partially through a shear-banding mechanism in the nanostructured matrix. The dendrites act as obstacles restricting the excessive deformation by isolating the highly localized shear bands in small, discrete interdendritic regions, and contribute to the plasticity. We suggest that microscale ductile crystalline phases might therefore be used to toughen nanostructured materials.