Ion beam deposition offers a number of interesting possibilities for creating nonlinear materials for photonic devices such as waveguides. Ion beams have been used by a number of groups to create metal and semiconductor nanocrystallites in silica and other glassy substrates in a geometry suitable for shallow channel waveguides. In this paper, we describe the use of He ion beams to initiate nucleation of Ag nanocrystallites in ion-exchanged soda-lime glass. The nanocrystallites are remarkably uniform in size, and exhibit substantial third-order optical nonlinearity. The combination of ion exchange and ion implantation has an advantage over conventional implantation techniques because it produces guiding layers deep enough (several microns) to form practical channel waveguides. In addition, we have shown that it is possible, by means of subsequent laser irradiation, to further alter the properties of the nonlinear composite material. In this particular case, irradiation by visible or infrared laser beams following ion implantation induces oxidation of the silver nanocrystallites, as documented by Auger analysis of the composite material. Furthermore, the third-order nonlinearity of the composite material changes sign, changing a self-focusing nonlinearity into one which is self-defocusing. These experiments suggest a number of possibilities for combining ion- and laser-beam irradiation to create laterally structured waveguide materials as well as nonlinear channel waveguides.