Silver and mercury ions are reduced in a common solution by sodium borohydride in the presence of poly(ethyleneimine). Colloidal alloy particles are formed, whose plasmon absorption band is blue-shifted with increasing mercury-to-silver ratio. The reduction mechanism is rather complex: large mercury "drops" are first formed, although silver ions are reduced simultaneously. This effect is explained by an interaction of the two metal redox systems, as silver clusters are reoxidized by mercury ions. The final particles are formed in a reaction of the mercury drops with reduced silver clusters, yielding amalgam particles smaller than the mercury drops. These processes are followed by spectrophotometric and light-scattering measurements. The alloy colloids are stable up to a mercury to silver molar ratio of 2. Upon exposure to air, part of the mercury in the alloy particles is oxidized.