Colloidal composite particles consisting of a nucleus of palladium and a mantle of silver are prepared via the reduction of silver ions on the surface of Pd particles (mean radius : 4.6 nm) with formaldehyde. The absorption spectra of the particles coated with Ag shells of different thicknesses are compared to the calculated ones (using Mie theory and the dielectric data of the bulk materials). The particles possess a surface plasmon absorption band close to 380 nm when more than 10 monolayers are deposited. Where the shell thickness is less than 10 monolayers, the absorption band is located at shorter wavelengths. The band disappears below about three monolayers. The calculated position of the band agrees with the observed one, although the intensity of the band is smaller than expected from theory. The electron mean free path in the shell is much smaller than the value predicted by Granqvist and Hunderi. Chemisorbed SH- ions damp the plasmon band, even when the shell is only four monolayers thick. This damping effect is less pronounced than for pure silver particles. Damping also takes place when the iodide ion adsorbs to the colloidal particles.