Palladium (Pd) thin films have been deposited by electron beam evaporation, and exposed to increasing hydrogen pressures. Transmittance spectra in the range of visible light have been measured to obtain from them, by means of a spectral projected gradient method, the wavelength dependence of the dielectric function. The decreasing metallic character of Pd with hydrogen absorption is displayed. This effect is more pronounced when Pd is deposited oil metallic substrates, and there is a correlation with an increase in the effective polarization of the core electrons determining the optical dielectric constant value. Another optimization approach is devised to separate the contribution of the free carriers and of the interband transitions to the optical conductivity and to the dielectric function. Very good agreement is found between the optimized parameters characterizing the free carrier contribution and the corresponding values reported in the literature and obtained by independent experimental methods. (c) 2005 Elsevier B.V. All rights reserved.