Polymer capped CdSe nanoparticles have been grown using a simple chemical process. Transmission electron microscopy study revealed the formation of isolated CdSe nanoparticles encapsulated in polyvinyl alcohol matrix. The optical band gap of nanoparticle has been found to be blue shifted from the bulk value due to quantum confinement of carriers. The recombination dynamics of polymer encapsulated nanoparticles has been studied in details using time resolved photoluminescence measurements. Room temperature photoluminescence decay has been used to explain the biexponential decay characteristics originated from the delocalized and localized carriers. The spectral photocurrent measurements of CdSe-polymer composite materials have also been studied.