A study of the innershell absorption of free CdS clusters in a beam and of CdS nanocrystals deposited on an Al substrate is presented. CdS clusters in a beam were prepared by a pick-up type cluster source. CdS nanocrystals with a very narrow size distribution were prepared by colloidal chemical synthesis. At the onset of the S 2p absorption a detailed structure is observed which can be assigned to excitonic absorption, variations in the density of states and XANES. The strength of the first absorption band increases with increasing cluster size in contrast to exciton absorption at the valence band. The absorption of CdS nanocrystals is compared with that of free CdS Clusters, The results give evidence that the Frenkel exciton model is more suitable for the description than the Wannier model.