Fabrication of nanocomposite membranes with high nanoparticle loading is a significant challenge because of the serious agglomeration of nanoparticles at high concentration. In this study, poly(ethylene glycol)-functionalized polyoctahedral oligomeric silsesquioxanes (PEG@POSS) nanoparticles were incorporated into a sodium alginate (SA) matrix to fabricate nanocomposite membranes. A large loading of PEG@POSS up to 50 wt% with a well dispersion in the membrane was achieved due to the good compatibility between PEG@POSS and alginate chains. Benefiting from the nanostructured size of PEG@POSS (1–3 nm), the obtained nanocomposite membranes possessed very thin active layers of 180–200 nm. A large quantity of hydrophilic PEG side chains enhanced the membrane surface hydrophilicity and offered massive water binding sites in the membranes. Homogeneously dispersed high content PEG@POSS nanoparticles increased the free volume of the nanocomposite membranes while maintaining a suitable free volume cavity size for water permeation. The optimum separation performance with a permeation flux of 2500 g m−2 h−1 and a separation factor of 1077 for dehydration of 90/10 wt% ethanol/water feed was achieved. Additionally, the effects of operation temperature and feed concentration on separation performance were investigated systematically.