The local structure of the AgPb{sub m}SbTe{sub m+2} series of thermoelectric materials has been studied using the atomic pair distribution function (PDF) method. Three candidate-models were attempted for the structure of this class of materials using either a one- or a two-phase modeling procedure. Combining modeling the PDF with HRTEM data we show that AgPb{sub m}SbTe{sub m+2} contains nanoscale inclusions with composition close to AgPb{sub 3}SbTe{sub 5} randomly embedded in a PbTe matrix.