We have reported a diffusion mediated agglomeration of cadmium sulphide (CdS) nanoparticles within cadmium arachidate (CdA(2)) film matrix. The structural morphology and formation of CdS nanoparticles are characterized by X-ray diffraction (XRD), X-ray reflectivity (XRR), atomic force microscopy (AFM) and ultraviolet-visible spectroscopy techniques. X-ray diffraction (XRD) results show a change in bilayer difference from 53.04 angstrom to 43 angstrom after the sulphidation. An epitaxial growth of the films by similar to 5 angstrom after sulphidation is confirmed from atomic force microscopy studies. The particle size calculated form UV-vis absorption edges are found to be varying from 2.6 nm to 3.3 nm for the different layers. A lateral dimension of 72-80 nm from AFM measurements and a size of 2.6-3.3 nm have confirmed one side flat pseudo two-dimensional disk-like nanoparticles. UV-vis reflectivity peak at E-1 (A) confirms the formation of hexagonal CdS nanoparticles along the c-axis. (C) 2013 Elsevier Ltd. All rights reserved.