We measured, through nearly degenerate three‐wave mixing, the third‐order nonlinear optical susceptibility of semiconductor doped glasses at frequencies below band gap. With typical 1.5%–5% volume fractions, the CdTe and CdS1−xSexnanocrystals give a contribution to the nonlinearity of the composite that is comparable to that of the glass matrix. The magnitude and the band‐gap dependence of the nonlinear susceptibility of the nanocrystals are similar to those of the bulk semiconductors. ©1995 American Institute of Physics.