The third-order optical nonlinearity&khgr;(3)of nanometer-sized CdO with different interfacial environments has been measured using theZ-scan technique. The real and imaginary parts of&khgr;(3)at 800 nm have been determined to be:−1.55×10−16 m2/Wand 0.91 cm/GW for CdO–CTAB (cetyltrimethyl ammonium bromide) organosol, and−6.97×10−16 m2/Wand 8.64 cm/GW for CdO–DBS (dodecylbenzene sulfonate) organosol. Origins of the optical nonlinearity and the effects of the interfacial conditions have been discussed. The optical Stark effect (OSE) and surface trapped states are the possible origins of the observed optical nonlinearity. The possible enhancement of optical nonlinearity of nanoparticles by intentional interfacial modification is suggested. ©1997 American Institute of Physics.