Summary. --We present a tight-binding model for the linear and non-linear optical properties of small metal particles, which takes into account both size and matrix effects. We show that the surface states and the dielectric medium embedding the particles determine the properties of the microcrystals; in particular, we prove that the shallow-lying d-band plays a crucial role in noble-metal particles. As an example, we calculate the third-order susceptibility and the phase-conjugated signal for gold clusters made of several hundred atoms. A good agreement with experimental results is obtained. Small metal particles, besides being intriguing as zero-dimensional quantum systems, are very promising for new technological developments. In particular, metal colloids and cermets, namely metallic particles embedded in a dielectric medium (water or glass), are attracting considerable interest for optical devices because of some peculiarities in their third-order non-linear response [l]. Even though their Z (3) is smaller than that observed in quantum-wells, their non-linear response is extremely fast (a few ps) compared to that of the best QW devices (several hundred ps in proton-bombarded materials). Moreover, the glass can be easily shaped to produce fibers, wave guides and microdevices.Hache et a/.[2] report phase-conjugation experiments with metal colloids containing Au microcrystals in the range 2-10 nm. These particles support a surface plasmon mode that is responsible for the intense colours of these composite materials [3,4]. A dramatic enhancement of the phase-conjugated signal near the dipolar plasma resonance frequency is observed. The experimental Z (3) susceptibility is about two orders of magnitude larger than that observed in bulk metal [2,5]. The very fast response (< 5ps) suggests that the non-linearity is due to the valence electrons of the metal particles.