In this paper, we investigated the optical and structural properties of the Ag:Ta2O5 nanocomposites. The nanocomposite films were prepared by magnetron co-sputtering of Ta2O5 with Ag chips. The transmission electron microscopy images clearly revealed that Ag nanoparticles were successfully produced by post-thermal annealing of the deposited films. The reflection spectra exhibited the surface plasmon resonance behavior. The photoluminescence (PL) spectra indicated that the Ag:Ta2O5 nanocomposites exhibited larger PL intensity than pure Ag or pure Ta2O5. The PL enhancement is thought to be due to the surface plasmon resonance of Ag nanoparticles. From the spatial intensity distributions that were obtained by solving Maxwell equations using the three-dimensional, finite-difference time-domain method, we found that there was strong confinement of optical field near the Ag nanoparticle. This optical confinement effect makes it possible to exhibit the enhanced PL.