Silver/bismuth oxide composite thin films with Ag concentration varying from 13.2% to 59.3% were prepared by cosputtering in a multitarget magnetron sputtering system. The absorption spectra of these thin films were measured, and the absorption peaks due to surface plasmon resonance of Ag particles showed a redshift behavior with increasing Ag concentration. By using the femtosecond time-resolved optical Kerr effect technique under 800 nm wavelength, the nonlinear optical properties of these films were investigated. The Kerr signals showed an ultrafast rise, suggesting that the main physical mechanism involved in the optical nonlinearity of Ag:Bi2O3 thin films on the femtosecond scale was the pure electronic contributions. The maximum value of the third-order nonlinear optical susceptibility of Ag:Bi2O3 thin films was 4.1×10−10 esu, and occurred at a Ag concentration of about 35.7%.