The addition of Fe₃O₄ nanoparticles to Bi₂Se₃ nanocomposites resulted in a significant increase of the thermoelectric figure of merit zT at room temperature from 0.14 in Bi₂Se₃ to 0.21 in Bi₂Se₃ with added 5 % volume of Fe₃O₄ nanoparticles. The main contributor to the improved zT is the large increase in carrier concentration, hence increased electrical conductivity. Electron microscopy investigation revealed chemical changes in the Bi₂Se₃ leading to segregation of Bi to the interface with the Fe₃O₄ nanoparticles. The fact that the altered Bi/Se proportion was constrained close to the grain boundaries resulted in a mild reduction of the Seebeck coefficient, less than what is expected from simple band structure models for the same increase in carrier density. The addition of Fe₃O₄ in relatively small volume fraction allowed to both decrease the thermal conductivity and increase the power factor in a Bi₂Se₃ material, the latter more intensely than usual substitution methods.