We report the ultrafast and large third-order nonlinear optical properties of CdS nanocrystals (NCs) embeddedin a polymeric film. The CdS NCs of 2 nm radius are synthesized by an ion-exchange method and highlyconcentrated in the two layers near the surfaces of the polymeric film. The two-photon absorption coefficientand the optical Kerr coefficient are measured with laser pulses of 250 fs duration at 800 nm wavelength. Theone-photon and two-photon figures of merit are determined to be 3.1 and 1.3, respectively, at irradiance of2 GW/cm2. The observed nonlinearities have a recovery time of ∼1 ps. The two-photon-generated free carriereffects have also been observed and discussed. These results demonstrate that CdS NCs embedded in polymericfilm are a promising candidate for optical switching applications.