Composite nanoclusters of gold and CdS with core/shell geometry have been synthesized using a chemical precipitation method in aqueous media. These nanoclusters are photoactive and exhibit transient bleaching in the 400-600 nm region when subjected to 355 nm laser pulse excitation. Capping of gold colloids with ultrasmall CdS nanoclusters (particle diameter similar to 4 nm) significantly alters the picosecond dynamics of the gold core. The bleaching of the surface plasmon absorption of the gold core is achieved by exciting the CdS shell. The major fraction of the interparticle electron transfer between CdS and Au nanoclusters is completed within the laser pulse duration of 18 ps.