Monolayer-protected Au, Ag, and Au:Ag alloy nanoclusters have been synthesized using octanethiol and octadecanethiol as capping agents. The particle-size distribution is narrow with an average core size of 3--4 nm. Optical nonlinearity induced by 35 ps pulses at 532 nm has been investigated in these samples using the Z-scan technique. It is found that in general, they behave either as saturable absorbers or reverse saturable absorbers depending on the intensity of excitation. Au and Ag clusters show nearly the same efficiency for optical limiting, but the alloy clusters are found to be less efficient in limiting and are less photostable. The observed effects are explained in terms of the electron dynamics of the excited-state species.