Nickel oxide nanoparticles having a mean particle size of 19.5 nm were synthesized by a simple chemical method. Those nanoparticles exhibited a spin glass like behaviour at a temperature around 9 K. The samples showed electronic conduction arising out of small polaron hopping between the Ni²⁺ and Ni³⁺ species present in the material. A large magnetodielectric parameter with a maximum value of 52.2% was observed in the sample at room temperature which resulted from the Maxwell–Wagner polarization effect. This was explained as arising due to a large negative magnetoresistance caused by spin polarized electron hopping between Ni²⁺ and Ni³⁺ sites with the consequential formation of space charge polarization at the interfaces of the NiO nanoparticles. This was substantiated by direct measurement of magnetoresistance of the samples which gave identical results. It is believed that negative magnetoresistance after direct measurement occurred due to the interaction between ferromagnetic and antiferromagnetic phases and the value was 37%, the highest reported in the literature so far. As a result of the presence of Ni³⁺ ions, antiferromagnetic phase and ferromagnetic like behaviour of NiO nanoparticles gave higher magnetization than other reported nanoparticles. Such large values of magnetoresistance of the samples will make the material useful as an ideal magnetic sensor.