The silver-coated fly ash-red mud nanocomposite (FARM-Ag) is synthesized through the environment-friendly facile chemical method. Scanning electron microscopy (SEM), Energy dispersive x-ray analysis (EDAX), X-ray diffraction (XRD), and UV–Visible absorption spectroscopy techniques are used to characterize the nanocomposite. A sensitive single-beam Z-scan technique is used to study its nonlinear properties under continuous-wave (CW) laser excitation as a function of sample concentration and laser power. It is observed that FARM-Ag exhibits negative refractive and positive absorptive nonlinearity due to the self-defocusing and reverse saturable absorption (RSA) effect, respectively. Here, the origin of the nonlinearity is attributed to the thermal lensing effect and the larger magnitude of the nonlinear refractive index (n2), nonlinear absorption coefficient (β), third-order nonlinear susceptibility (|χ(3)|), and thermo-optical coefficient (dn/dT) are obtained as – 2.978 × 10−12 m2W−1, 1.424 × 10−5 mW−1, 3.477 × 10−14 m2V−2, and - 3.903 × 10−5 K−1, respectively. The results suggest that this newly synthesized nanocomposite from industrial waste might have a possible use for nonlinear optical devices.