We have functionalized poly(N-vinyl carbazole) (PVK) by controlled sulfonation. CdS nanocystals of 3−20nm across were synthesized in the sulfonated PVK matrix with the CdS molar fraction of ∼1−18%. TheCdS nanoparticle size increased with the molar fraction of CdS. At high CdS molar fractions, the CdSnanocrystals exist in both cubic and hexagonal phases. Photoluminescence efficiency of PVK decreases whenthe molar fraction of CdS increases due to quenching through interfacial charge transfer. Photoluminescenceattributable to the CdS nanocrystals can be observed only at low molar fractions of CdS. Significantenhancement in photoconductivity induced by the chemical doping of CdS in PVK has also been demonstrated.