CdS quantum dots (QDs) in a polyvinyl alcohol (PVA) matrix have been grown by a chemical method and are characterized by transmission electron microscopy (TEM), UV–vis absorption, photoluminescence (PL) and energy dispersive x-ray diffraction (EDX). TEM studies of CdS films show that a nearly spherical cluster of CdS QDs with an average radius of 10–15 nm is formed. From absorption measurements, it is observed that with increasing the PVA concentration from 5 to 8 wt.%, the absorption edge shifts from 3.1 to 3.6 eV, which is attributed to an increase in quantum confinement with decreasing the QD size. PL studies in an energy range of 1.8–3.3 eV show two distinct peaks. The higher-energy peak corresponds to band edge emission, whereas the lower-energy peak corresponds to defect emission. EDX results revealed that the atomic concentration of cadmium is much lower than that of sulfur, indicating that cadmium vacancies are predominant. It was concluded that cadmium vacancies are mainly responsible for defect emission in the PL spectrum.