Structure of GaAs-SiO2composite thin films prepared by magnetron rf co-sputtering technique were investigated by transmission electron microscopy, x-ray diffraction, and x-ray photoelectron microscopy. The results show that GaAs microcrystallites with an average size of 10 nm were uniformly dispersed in SiO2thin film. Quantum confinement effect was observed in the film by the measurement of absorption spectrum, and the blueshift of absorption edge was measured to be 0.5 eV. Nonlinear optical absorption and nonlinear optical refraction were studied byZ-scan technique using single Gaussian beam of He-Ne laser (632 nm). An enhanced third-order nonlinear optical absorption coefficient and nonlinear optical refractive index were achieved in the thin film, and measured to be 2×10−1and 4×10−6cm2/W, respectively. ©1997 American Institute of Physics.