We present an overview of the simple and environmentally benign protocol we have developed recently, for the in situ generation of metal nanoparticles inside polymer films by mild thermal annealing, leading to free-standing as well as supported thin films of nanoparticle-embedded polymer. The fabrication chemistry is discussed and spectroscopic/microscopic characterizations of silver and gold nanoparticles in poly(vinyl alcohol) film are presented. Optical limiting characteristics of the silver-polymer system are investigated in detail and preliminary results for the gold-polymer system are reported.