Results from the successful growth of high quality KH₂PO₄ (KDP) crystals with incorporated TiO₂ anatase nanoparticles and the characterization of these crystals using several complementary methods are presented. The study allowed the nature and distribution of macroscopic and microscopic defects in the KDP:TiO₂ crystals to be clarified. The relationship between these defects and the distribution of TiO₂ nanoparticles, and the influence of incorporated nanoparticles on the nonlinear optical properties of composite crystals in comparison with pure crystals were also elucidated. Visual observations, transmission and scanning electron microscopy have shown that the anatase nanoparticles were captured mainly by the pyramidal growth sector and, to a considerably lesser extent, by the prismatic growth sector. Energy dispersive x-ray analysis was able to confirm that the growth layer stacks contain the TiO₂ particles. Fourier transformation infrared spectra have clearly shown the presence of an absorption band at about 800 cm⁻¹ in both KDP:TiO₂ and TiO₂, and the disappearance of the band, associated with hydroxyl OH⁻ groups on the TiO₂ surface in KDP:TiO₂. Significant variation in the imaginary and real parts of the cubic nonlinear optical susceptibilities and refractive index changes at continuous wave excitation were found in prism and pyramid parts of pure KDP and KDP:TiO₂ samples. Deciphering complicated electron paramagnetic resonance spectra in KDP:TiO₂ and comparison with published data permitted the identification of paramagnetic defects along with their associated g-factors and zero-field splitting parameters (in some cases for the first time). It was found that the dominant lines belong to four different centers Fe_A³⁺, Fe_B³⁺, Cr_R³⁺, and Cr_GB³⁺. From analysis of line intensities it was concluded that the concentration of intrinsic defects like potassium and hydrogen vacancies in KDP:TiO₂ is comparatively small, that the concentration of non-controlled impurities in nominally pure KDP samples is several times larger than in KDP:TiO₂, and that the concentration of non-controlled impurities in the prismatic part of the KDP:TiO₂ boule is approximately twice as large as in the pyramid part.