The optical and microstructural properties of CdS-Al2O3 nanocomposite (CdS-Al2O3 = 20:80 to 50:50) thin films synthesized by sol-gel techniques were studied. Optical transmission spectra indicated a marked blue shift of the absorption edge due to quantum confinement. Band gaps of CdS-Al2O3 nanocomposites were found to vary in the range 3.69-2.61 eV. The sizes of the nanocrystals, estimated from the blue shift (0.2-1.2 eV) of the absorption edges and transmission electron microscopy, were found to vary in the range 2.8-7.0 nm. X-ray diffraction studies showed reflections from (111), (200), (220), and (311) planes of CdS in the cubic phase. Microstructural characterization by high-resolution transmission electron microscope (HRTEM) indicated well crystallinity of the nanoparticles and lattice fringes supported the cubic phase of CdS. Raman spectroscopy was carried out for CdS-Al2O3 nanocomposites, which indicated a prominent peak at approximately 299 cm(-1). Significant changes in the peak position and intensity of the Raman peak were observed with varying the annealing temperature (373-573 K). Photoluminescence measurements indicated a prominent broad peak at approximately 1.81 eV due to the surface defects in the CdS nanocrystallites. The present study revealed Al2O3 to be a good capping material for CdS nanoparticles.