Plasma polymer thin films with small isolated silver particles and high volume fractions were prepared by simultaneous plasma polymerisation of hexamethyldisiloxane and metal evaporation. The optical properties of the films were determined by UV–vis spectrophotometry and the electrical behaviour by electrical transport measurements and by impedance spectroscopy. Thermal annealing causes a dramatic change in the DC and AC conductivity, which can be explained by the formation of percolation paths and the reduction of cluster–matrix interactions. UV–vis spectra of Ag/HMDSO composites revealed an additional absorption in the long wavelength region during the annealing process. This effect can be explained by increasing electromagnetic coupling between neighbouring clusters. The results can be simulated by a microscopic model of the embedded metal clusters, in which the isolated spherical clusters are coated by a thin dielectric layer, which prevents agglomeration but allows an electron exchange between the clusters due to an electron hopping process.