The nanocomposites comprising of anatase titania nanoparticles uniformly distributed inside the porous carbon matrix were synthesized using furfuryl alcohol, tetrabutyltitanate, and nonionic surfactant. The characterization of the nanocomposite by scanning electron microscopy, transmission electron microscopy, energy dispersive x-ray analysis, x-ray diffractometry, and Raman spectroscopy revealed the formation of anatase titania nanoparticles of average sizes 10 to 20 nm. The observed broadening and blueshift of the main Raman peak of titanium dioxide nanoparticles were explained using the phonon confinement effect. The nanocomposite exhibited strong paramagnetism at low temperatures and was diamagnetic at higher temperatures, as well as a small contamination by magnetic impurities was detected. The paramagnetism originated from the amorphous defect-rich carbon and oxygen vacancies in titania.