Laser-induced ultrafast nonlinear optical (NLO) response was observed in transient absorption, reflection and NLO measurements in VO 2 thin films. The films were prepared using pulsed laser deposition technique with metallic vanadium and V 2O 5 powder employed as target material. The obtained thin films exhibit a thermal, as well as a laser-induced phase transition (PT) from semiconductor state at room temperature to metallic state. A typical hysterisis was observed for electric resistivity and optical reflectance verses temperature T. For the laser-induced PT in femtosecond pump–probe experiment, the PT was found to be ultrafast, immediately upon laser excitation. Kinetics study suggests that the PT is realized via an intermediate state, presumably a Wannier–Mott exciton (WME) state, followed by a resonant transition to the metallic phase state. The presence of the intermediate state is responsible for an extremely large third-order susceptibility observed in a nonlinear holographic experiment. In a 80 nm thick VO 2 thin amorphous film, the value of χ (3) was measured to be 1.3×10 −8 esu which is four orders of magnitude greater than a standard reference sample of CS 2. In addition, the nonlinear response was further enhanced with diffraction signal increased by a factor of 4 after the laser excitation. A signal dip at ∼1.2 ns was repeatedly observed, which is presumably due to the excitation process associated with the intermediate state. Finally, the resonant transition from the intermediate state to the metallic state, giving rise to a maximum diffraction signal intensity from the formed transient grating.