Nanocomposite films composed of Ag particles embedded in BaTiO3 matrix were grown on MgO(100) substrates by pulsed laser deposition. The structures of the films were determined by X-ray diffraction. The size and shape of the Ag particles were observed by transmission electron microscopy. The X-ray photoelectron spectroscopy results showed that Ag is in the metallic state. The optical absorption properties were measured from 300 to 800nm, and the absorption peaks due to the surface plasmon resonance of Ag particles were observed. With increasing annealing temperature and Ag concentration, the peak absorption increased and shifted to longer wavelength (red-shift).