We report the synthesis of Ag nanoparticles in polyethylene terephthalate (PET) matrix using atom beam co-sputtering. Metal filling factor was evaluated by Rutherford backscattering spectrometry. Microstructural evolutions of the nanocomposites films were investigated by transmission electron microscopy, which confirmed the formation of irregular shaped Ag nanoparticles. The X-ray photoelectron spectroscopy measurements of the sputter deposited PET film and co-sputtered deposited Ag-PET as well as PET bulk foil (from Goodfellows) were performed to study chemical composition of the nanocomposite films. The optical properties of these nanocomposites were studied by light absorption/ transmission, which revealed a narrow transmission of UV light ∼320 nm and a broad surface plasmon resonance absorption extending up to infrared region (∼2400 nm). Swift heavy ion irradiation of Ag-PET nanocomposite resulted in narrowing the full width at half maximum of transmission band.