A comprehensive study of the effect of samarium nanoparticles on electrical transport properties of poly aniline has been reported. Samples are prepared by chemical oxidative polymerization of aniline in the presence of samarium nanoparticles and characterized by XRD, FESEM, EDS, HRTEM and UV-Vis spectrometer. When the samarium content in poly aniline matrix increases, energy band gap decreases and conductivity increases by four orders of magnitude. A transformation of negative to positive magnetoconductivity has been observed by incorporating samarium nanoparticles in poly aniline matrix. Two types of activation behavior have been observed from the dielectric relaxation behavior. AC conductivity strongly depends on magnetic field. Although, at present, no theoretical model is found in literature to explain directly the behavior of ac conductivity in the presence of magnetic field, it may be due to the change of grain and interfacial boundary resistances by magnetic field.