Abstract: The optical properties of composites with metallic nanoparticles are studied, taking into account the effects due to the nonlocal dielectric response of the metal and the coalescing of the particles to form clusters. An approach based on various effective medium theories is followed, and the modeling results are compared with those from the cases with local response and particles randomly distributed through the host medium. Possible observations of our modeling results are illustrated via a calculation of the transmission of light through a thin film made of these materials. It is found that the nonlocal effects are particularly significant when the particles coalesce, leading to blue-shifted resonances and slightly lower values in the dielectric functions. The dependence of these effects on the volume fraction and fractal dimension of the metal clusters is studied in detail.