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'Colossal magnetoresistance' in perovskite manganites such as La_0.7Ca_0.3MnO₃ (LCMO), is caused by the interplay of ferro-paramagnetic, metal–insulator and structural phase transitions. Moreover, different electronic phases can coexist on a very fine scale resulting in percolative electron transport. Here we report on (LCMO)_1–x:(MgO)_x (0 < x ≤ 0.8) epitaxial nano-composite films in which the structure and magnetotransport properties of the manganite nanoclusters can be tuned by the tensile stress originating from the MgO second phase. With increasing x, the lattice of LCMO was found to expand, yielding a bulk tensile strain. The largest colossal magnetoresistance of 10⁵% was observed at the percolation threshold in the conductivity at x_c ≈ 0.3, which is coupled to a structural phase transition from orthorhombic (0 < x ≤ 0.1) to rhombohedral R3̄c structure (0.33 ≤ x ≤ 0.8). An increase of the Curie …