The structural and electrical characteristics of thin silicon dioxide layers with embedded Si nanocrystals are reported fabricated by low-energy silicon implantation and with subsequent annealing in inert and diluted oxygen. Thermal treatment in diluted oxygen increases the thickness of the control oxide, does not affect significantly the size of the nanocrystals, and improves the integrity of the oxide. As a result, strong charge storage effects at low gate voltages and enhanced charge retention times are observed through electrical measurements of MOS capacitors. These results indicate that a combination of low-energy silicon implants and annealing in diluted oxygen permits the fabrication of low-voltage nonvolatile memory devices.