The village was nestled in a green spot, \(\underline{\hspace{1cm}}\) the ocean and the hills.
Step 1: Understand the context.
The sentence describes the location of the village relative to two things: the ocean and the hills.
Step 2: Recall the grammar rule.
The word "between" is used when referring to two distinct objects, persons, or places.
On the other hand:
- "in" refers to being inside something.
- "at" refers to a specific point/place.
- "through" implies motion across something.
Step 3: Apply rule to the sentence.
Since the village lies in a spot that is surrounded on one side by the ocean and on the other side by the hills (two entities), the correct preposition is:
\[
\text{between the ocean and the hills}
\]
Final Answer: \[ \boxed{\text{between}} \]