We study the optical and microstructural properties of silver/amorphous carbon (Ag/a-C) nanocomposite thin film and its modification induced by swift heavy ion irradiation. Ag nanoparticles (NPs) embedded in a-C matrix were synthesized by co-sputtering of Ag and graphite by 1.5 keV neutral Ar atom beam. These Ag NPs were irradiated by 120 MeV Ag ions at different fluences ranging from 1 × 1012 to 3 × 1013 ions/cm2. Optical absorption studies revealed that surface plasmon resonance of Ag NPs in pristine film occurs at a wavelength of ~ 430 nm and it shows a blue shift (~ 26 nm) with increasing ion fluence up to 3 × 1013 ions/cm2. Transmission electron microscopy and Rutherford backscattering spectroscopy were used to quantify particle size and metal atomic fraction, respectively, in the nanocomposite films. The growth of Ag NPs with bi-model distribution at a fluence of 3 × 1013 ions/cm2 was observed with ion irradiation. Raman spectroscopy was used to investigate the effect of heavy ion irradiation on carbon matrix. The blue shift in plasmonic wavelength is explained in terms of increase in sp2 content in carbon matrix by heavy ion irradiation due to thermal energy deposition which leads to a decrease in dielectric properties of the matrix.