InP/SiO2 composite thin films have been fabricated on heated slices of silica glass or polished silicon by a radio frequency (RF)magnetron co-sputtering and post-annealing. X-ray diffraction (XRD) patterns and Raman spectra of the films confirmed the presence of InP nanocrystals in the composite films. Pure InP/SiO2 nanocomposite films have been obtained by high temperature (520degreesC) annealing in over-pressured phosphorus vapor. Peaks in the room temperature photoluminescence (PL) spectra have been identified approximately, though the amplitudes of the peaks are relatively small. Optical absorption edge blue shifts and large enhancement in optical non-linearity of the films at room temperature have been observed and attributed to strong quantum confinement. (C) 2002 Elsevier Science B.V. All rights reserved.