SiO2 thin films embedded with Ge microcrystallites (Ge-SiO2 films) were prepared by RF-magnetron co-sputtering method from a composite target of Ge and SiO2. The average size of Ge crystallites can be modulated by the experiment parameters. The optical absorption and non-linear optical properties of Ge-SiO2 films were measured. The blue shift of the optical absorption edge, the saturated absorption and two-photon absorption under the condition of resonant absorption have been observed, and are discussed according to the quantum confinement effect.