Ag/PVP nanocomposites were prepared by a chemical reduction process. Then, a drop-casting method was employed to deposit the Ag/PVP nanocomposite thin film on the glass substrate. To study the optical and structural properties of the prepared sample, different characterization methods including UV–Vis absorption spectroscopy, scanning electron microscopy, XPS, and Raman spectroscopy were employed. The optical nonlinearity of the prepared thin films was evaluated by the Z-scan technique using a He–Ne laser beam (632 nm). Results showed that the nonlinear refraction index (n2 ~ 10−6 cm2/w) and nonlinear absorption coefficient (β ~ 10−1 cm/w) of the prepared Ag/PVP nanocomposite thin film are higher than the previously reported values. A weak thermal optical nonlinearity was also observed and the nonlinear response dominantly resulted from the electronic origin.