We demonstrate twofold enhancement of the saturated refractive index modulation (Δnsat) recorded in a photopolymerizable nanoparticle–acrylate polymer composite film by incorporating thiols acting as chain transfer agents. The chain transfer reaction of thiols with (meth)acrylate monomer reduces the polymer crosslinking density and facilitates the mutual diffusion of nanoparticles and monomer during holographic exposure. These modifications provide increased density modulations of nanoparticles and the formed polymer, resulting in the enhancement of Δnsat as high as 1.6×10−2 at a wavelength of 532 nm. The incorporation of thiols also leads to shrinkage suppression and to improvement of the grating’s spatial frequency response. Such simultaneous improvement is very useful for holographic applications in light and neutron optics.