Cerium dioxide nanoparticles have been synthesized by the hydrothermal method and then have been loaded with Ag metal using the conventional wetness incipient impregnation to form Ag/CeO2 nanoheterojunctions. The physiochemical characteristics of as-synthesized samples have been justified using X-ray diffraction (XRD), field emission scanning electron microscopy (FESEM), energy dispersive spectroscopy (EDS) and transmission electron microscopy (TEM). UV–Vis reflectance spectroscopy (UV–Vis DRS) and photoluminescence (PL) emission techniques have been employed to investigate the linear optical properties. Characterization of UV–Vis DRS has revealed broadened light absorption towards visible light for Ag/CeO2 nanoheterojunctions owing to the presence of the surface plasmon resonance. The PL results have also exhibited more efficient photo-excited charge separation that can be ascribed to the internal electric field formed across Schottky interface. The thirdorder nonlinear parameters have been examined by single-beam Z-scan setup in the near infrared spectral range using pulsed Nd-YVO4 laser. The Z-scan results have indicated negative values of nonlinear refractive indices providing evidences for the self-defocusing behaviors at the excitation wavelength of 1064 nm. The measured magnitude of the third-order nonlinear susceptibility for Ag/CeO2 nanoheterojunctions has been found to be 78.6 × 10−6 esu, showing an enhancement about 16 times higher than that of pristine CeO2. The increased nonlinear susceptibility in such heterostructures opened up a new way for appropriately designing new types of nonlinearity-based devices having a promising application in the photonic systems.