A novel nanocomposite containing polyethylene and polyhedral oligomeric silsesquioxane (POSS) nanoparticles has been characterized using wide-angle X-ray scattering (WAXS). In copolymers formed between ethylene and POSS containing macromonomers, the POSS units, attached as pendant groups off the polyethylene backbones, are found to aggregate and crystallize as nanocrystals. The POSS nanoparticles in such PE-co-POSS copolymers form a lattice separate from the PE lattice with characteristic diffraction signals. From both line broadening of the diffraction maxima and also the oriented diffraction in a drawn material, we conclude that POSS crystallizes as anisotropically shaped crystallites. The presence of POSS disrupts the crystallization of polyethylene and results in less and smaller/disordered polyethylene crystallites. POSS nanocrystals are covalently connected to the PE crystallites via an intermediate disordered interfacial region. The PE crystallites are reinforced by the POSS crystallites, maintaining their crystalline structure under high draw ratio. In total, these contributions help to explain the novel properties of this type of nanocomposite, such as better dimensional stability, extension of high-temperature rubbery plateau, and strong thermal oxidative resistance.