Silver colloids of particle diameter 40-60 nm have been synthesized using a chemical reduction method in aqueous medium. These nanoclusters are photoactive and exhibit transient bleaching in the 400-500 nm region followed by a strong absorption in the visible-near-infrared region when subjected to 355 nm laser-pulse excitation. The transient bleaching of the surface plasmon absorption band is a monophotonic process. while the absorption growth in the red region is a biphotonic process arising from the photoejection of electrons. The 40-60 nm clusters were observed to break up into smaller clusters (5-20 nm) with 355 nm laser-pulse excitation. The choice of excitation wavelength provides the size selectivity in the fragmentation of the clusters. For example, when the excitation wavelength was switched to 532 nm, only larger (or irregularly shaped) particles were found to break up.