A microscopic approach to surface-enhanced Raman scattering (SERS) from molecules adsorbed on noble-metal nanoparticles is developed. For nanoparticle sizes smaller than 10 nm, the classical electromagnetic enhancement mechanism is modified by quantum-size effects. Using time-dependent local field approximation, we perform systematic analysis of SERS in nanometer-sized Ag nanoparticles. We find that, in small nanoparticles, Raman cross-section enhancement is governed by the interplay between Landau damping of the surface plasmon and interband screening in the nanoparticle surface layer. (c) 2006 Elsevier B.V. All rights reserved.