The reabsorption of photoluminescence within a medium, an effect known as the inner filter effect (IFE), has been well studied in solutions, but has garnered less attention in regards to solid-state nanocomposites. Photoluminescence from a quantum dot (QD) can selectively excite larger QDs around it resulting in a net red-shift in the reemitted photon. In CdSe/CdS core/shell QD-polymer nanocomposites, we observe a large spectral red-shift of over a third of the line width of the photoluminescence of the nanocomposites over a distance of 100 μm resulting from the IFE. Unlike fluorescent dyes, which do not show a large IFE red-shift, QDs have a component of inhomogeneous broadening that originates from their size distribution and quantum confinement. By controlling the photoluminescence broadening as well as the sample dispersion and concentration, we show that the magnitude of the IFE within the nanocomposite can be tuned. We further demonstrate that this shift can be exploited in order to spectroscopically monitor the vertical displacement of a nanocomposite in a fluorescence microscope. Large energetic shifts in the measured emission with displacement can be maximized, resulting in a displacement sensor with submicrometer resolution. We further show that the composite can be easily attached to biological samples and is able to measure deformations with high temporal and spatial precision.