Er3+:Ag-antimony glass nanocomposites are synthesized in a new reducing glass (dielectric) matrix K2O–B2O3–Sb2O3 by a single-step melt-quench technique involving selective thermochemical reduction. The UV-vis-near-infrared absorption spectra show typical surface plasmon resonance (SPR) band of Ag0 nanoparticles (NPs) in addition to the distinctive absorption peaks of Er3+ ion. X-ray diffraction and selected area electron diffraction results indicate formation of Ag0 NPs along the (200) plane direction. The transmission electron microscopic image reveals the formation of spherical, fractal, and rod-shaped Ag0 NPs having maximum size ∼31 nm. The rod-shaped Ag0 NPs have aspect ratio ∼2.4. The field emission scanning electron microscopic image shows development of three dimensional cornlike microstructures. Photoluminescent upconversion under excitation at 798 nm exhibit two prominent emission bands of Er3+ ions centered at 536 (green) and 645 (red) nm due to 4S3/2→4I15/2 and 4F9/2→4I15/2 transitions, respectively. Both the bands undergo a maximum of three- and eightfold intensity enhancement, respectively, at Ag0 concentration of 0.007 wt % (1.8×1018- atoms/cm3). Local field enhancement induced by Ag0 SPR is found to be responsible for enhancement while energy transfer from Er3+→Ag0 and optical reabsorption due to Ag0 SPR for quenching.