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The aim of this project was to establish the arc discharge in water method as a valid method of producing metal oxide nanoparticles (NPs) with dielectric properties. A vertical arc discharge system was designed and fabricated and several diagnostic tools were attached to the system in order to monitor in situ the propagation of the plasma. Electrical measurements, high speed imaging, optical emission spectroscopy and electrode mass reduction measurements were employed to three different anode materials; aluminum and tantalum rods as well as a mixture of copper-tantalum compressed powder grains. The cathode of the DC arc was in all cases was a carbon rod. The product of the discharge was collected in powder form and examined by means of electron microscopy, x-ray diffraction (XRD), x-ray photoelectron spectroscopy (XPS) and broadband dielectric spectroscopy (BDS). The experiments showed that, during discharge, the physical processes occurring between the electrodes, force the anode material to evaporate in the atomic level. While atomization takes place, the water molecules surrounding the plasma region gets vaporized due to the localized high temperature resulting in the division of oxygen and hydrogen atoms. Metal and oxygen atoms bond, becoming the seeds for nanoparticle formation. The particle growth stops when quenching occurs due to the continuous condensation and expansion of the plasma. High-Resolution Transmission Electron Microscopy (HR-TEM) examination revealed that spherical crystalline nanoparticles are formed, with an average size of 40 nm when using either aluminum or tantalum rod. XRD and XPS analyses concluded that high purity Ah03 and Ta20s NPs are produced by using the arc discharge method respectively. HR-TEM was also employed to the nano-product of the composite anode showing a peculiar core-shell NP structure (mean size 20 nm). Scanning Transmission Electron Microscopy (STEM) was used in High Angle Annular Dark Field (HAADF) imaging and Energy Dispersive X-ray Spectroscopy (EDX) modes to identify the atomic arrangement resulting in the formation of an oxidized copper core with an oxidized tantalum shell. The nano-powder was tested via BDS showing a capacitive behavior. Throughout this work it was been proven that arc discharge in water is a cost- effective and easy to implement method of preparing dielectric NPs. A methodology for studying both the process as well as the product has been described. High purity Ah03 and Ta20s have been successfully produced. CuO- Ta20s core-shell NPs were synthesized for the first time and were characterized structurally and electrically. Adjustments in order to improve the efficiency of the system were proposed and new ideas for the formation of composite metal oxides have emerged.