CdS nanocrystals embedded in sodium borosilicate glass were synthesized through sol-gel process. The CdS nanocrystals were usually 10 to 20 nm in size. The microstructure of CdS nanocrystals was determined to be of the hexagonal phase. The morphology and microstructure of the glass were examined using diverse techniques including scanning-probe microscopy (SPM), x-ray photoelectron spectroscopy (XPS), transmission electron microscopy (TEM), scanning transmission electron microscopy (STEM), energy dispersion x-ray spectra (EDAX), and high-resolution TEM (HRTEM). The linear optical absorption spectrum of the glass showed a blue shift as a result of quantum-size effect. Furthermore, the third-order optical nonlinearities of the glass were studied by Z-scan technique at a wavelength of 770 nm. The results showed that the third-order optical nonlinear refractive index γ, absorption coefficient β, and susceptibility χ(3) were determined to be −2.16 × 10−16 m2/W, 6.32 × 10−11 m/W, and 1.20 × 10−10 esu, respectively, which were greater than those reported previously for CdS nanocrystals embedded in different matrices.