The topical application of sunscreen and cosmetic products that afford protection from terrestrial ultraviolet radiation to reduce the risk of developing skin cancer is an integral part of modern sun protection. The current sunscreen formulations use inorganic zinc oxide (ZnO) and titanium dioxide (TiO2), that are highly photocatalytic, with the ability to penetrate the skin, and exhibit potential toxicity. In this study, we demonstrate a novel methodology to increase the sun protection factor (SPF) of encapsulated metal oxide (Fe2O3) nanoparticles in poly(lactic acid) (PLA) microspheres as ultraviolet filters for sunscreen applications. The combination of these two materials results in a nanocomposite with increased UV attenuation and without significant cytotoxic effects during in vitro evaluation. A commercial sunscreen formulation was used to show the benefits of the developed nanocomposites by replacing the harmful ZnO particles by the Fe2O3-PLA ones, and a throughout comparison between commercial and the new sunscreen formulation was performed. By adding a small amount of the novel Fe2O3-PLA particles, a remarkable increase in the SPF performance, from 40 (commercial ZnO formulation) to 50 was achieved just by replacing the ZnO particles with 5 wt% of Fe2O3-PLA ones, resulting in a high level of UV protection, coupled with lower dangerous photocatalytic activity when compared with commercial ZnO nanoparticles. The encapsulation of metal oxide nanoparticles by PLA could provide a route to improve the sunscreen efficacy and enhance its SPF by using more environmentally friendly materials.